Tax Preparation & Planning

Serving Greater Boston, Merrimack Valley, North Shore & NH Seacoast

Monthly Archives:November 2016

BySteve

10 Year-End Tax Strategies That Save You Money

As the end of another business and tax year is upon us, consider these 10 year-end tax strategies that save you money.

  1. Pay Taxes Early:  You can accelerate your income tax deductions by paying January estimated income taxes in December.
  2. Accelerate Income Tax Deductions:  Likewise, you can make your January mortgage payment in December.  You can also do the same for property or excise taxes and even charitable deductions. This will help you lower your taxable income and possibly offset increases in earned income, bonuses or real estate income.
  3. Postpone Receipt of Income:  For cash-basis taxpayers (that’s most of us), delay your year-end receivables. Defer payment of dividends from your C corporation until 2017. talk with your employer about delaying receipt of bonus income. If possible, contribute extra to your retirement plans. Anything that helps you lower your taxable income may also be useful for college financial aid strategies.
  4. Don’t Buy Capital Assets This Year:  With a new president entering the White House, you may want to take a wait-and-see approach to tax changes.  GOP proposals include allowing businesses to expense the entire purchase of capital assets.  This will lower taxable income more than the current Section 179 deduction limits.
  5. Make Gifts to Charities and Family Foundations with Appreciated Assets:  Consider gifting low-basis stock instead of selling it to raise cash for gifts which could lead to capital gains taxes.
  6. Harvest Losses to Offset Capital Gains: Be aware of the capital gains that may be distributed to you from your mutual funds or other investments near the end of the year.  Take advantage of those securities that are experiencing a loss and use the tax savings to offset your gains.
  7. Establish and Fund Qualified Plans for Your Family: Consider making a gift of up to $5,500 to either a traditional or Roth Individual Retirement Account (IRA) for your children or grandchildren who aren’t funding their own IRAs but have enough earned income to report.
  8. Identify Assets and Amounts to Make Proper Grantor Retained Annuity Trust Distributions Before April 17, 2017:  If the annuity payment date is tied to the end of the trust’s taxable year, the payment must be made no later than the date the trust’s income tax return us due.
  9. Make Annual Exclusion Gifts to Chosen Loved Ones of $28,000 (per Married Couple):
    • Make any gifts into trusts for children and/or grandchildren
    • Contribute to Internal Revenue Code Section 529 plans, which grow free of income tax
    • Make unlimited gifts directly to educational institutions and medical facilities or your own family foundation
  10. Make Distributions of Income from Trust Accounts and Estate Accounts to Lower the Income Tax Liability: Estates and trusts are taxed at the highest income tax rates (and a much lower threshold at which the 3.8 percent Medicare surtax applies).  So it may make sense to distribute income to the beneficiaries to be taxed at the beneficiary’s lower income tax rates.