End of Year Tax Planning

November is a great time to do tax planning before the end of the year. Reviewing your tax position now gives you time to implement tax saving strategies before the “busyness” of the holiday season sets in. Here are several techniques that could help you keep more money in your pocket (until Black Friday that is). Contact us to find out how these steps and others can work for you.

  • Realize losses on stock while substantially preserving investment position.
  • Convert investment income taxable at regular rates (e.g., interest income) into qualifying dividend income.
  • Arrange with employer to defer bonus until 2017.
  • Increase basis in S corporation or partnership to make possible a 2016 loss deduction.
  • Use credit card to pay expenses.
  • Put equipment in service before year-end to qualify for first-year depreciation deduction based on half-year convention.
  • Settle insurance or damage claim if this will maximize casualty loss deduction.
  • Apply bunching strategy to “miscellaneous” itemized deductions, medical expenses, and other itemized deductions to increase deductible amounts.
  • Increase withholding to eliminate or reduce estimated tax penalty.
  • Set up self-employed retirement plan.
  • Make gifts taking advantage of the $14,000 gift tax exclusion.
  • Watch out for marriage penalty in regard to year-end marriage or divorce plans.
  • Consider deferring a debt cancellation event until 2017.
  • Decide whether to elect to deduct investment interest against capital gains and/or qualified dividends.
  • Take steps to avoid or minimize income tax on Social Security benefits.
  • Step up level of participation in business activity to meet material participation standard under passive loss rules.
  • Dispose of passive activity to free up suspended losses.
  • Ask employer to increase withholding of state and local taxes to pull the deduction of those taxes into 2016.
  • Extend subscriptions to professional journals, pay union or professional dues, enroll in (and pay tuition for) job-related courses, etc., to bunch into 2016 miscellaneous itemized deductions subject to the 2%-of-AGI floor.

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