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2016 Year End Tax Savings Strategies

Happy Holidays!

As we are entering the last week of 2016, I thought it best to point out a few tax-saving strategies that can still be implemented before the 2016 tax year ends. I know that with all of the excitement of the holidays and family being in town, taxes are the probably the last thing on your mind, but it only takes one of the strategies listed below to possibly help to lower your 2016 tax bill.

As always, please contact someone at our firm should you have any questions about the information below and how it applies to your individual tax situation.

Year-End Tax Planning for Individual Taxpayers

• Prepay your mortgage payment that is due on January 1, 2017 by December 31, 2016. You can deduct the interest on your 2016 tax return.
• Charge deductible expenses like medical bills, state and local taxes, real estate taxes and charitable donations to your credit card. By charging these expenses now, they become deductible in 2016 even if you do not pay the credit card bill until next year.
• Pay your state estimated tax payment that is due on January 15, 2017 no later than December 31, 2016. This will count towards your itemized deductions on your 2016 tax return.
• Sell stock losses before the year ends. This will help to offset any capital gains and possibly enable you to take a loss of up to $3,000 on your 2016 tax return.
• Maximize your charitable contributions and donate unwanted items before the year is over. Please try to document the items that were donated and take pictures as well if possible. Also, hold on to the receipts that you receive when donating.
• Exhaust all of the funds contributed to your Flexible Spending Account (FSA) by year-end. You may be able to charge expenses for 2016 through March 15, 2017, but please verify this with your employer as this is at their discretion. Any remaining funds after the spending deadline are forfeited.

Year-End Tax Planning for Business Owners

• Cash-basis taxpayers, pay any outstanding bills by December 31, 2016 (this includes mailing the check on December 31, 2016). This will allow you to deduct the expense in the current tax year even though the payments may not be deducted your account until January 2nd or 3rd or later.
• Also for cash-basis taxpayers, remember that all payments that are received on or before December 31, 2016 are included in the current year’s income.
• For accrual-basis taxpayers, write off any non-collectible accounts receivable before the year ends.
• Also for accrual-basis taxpayers, remember that your revenues are calculated based on what you invoice and bill between January 1, 2016 and December 31, 2016. Any work performed after December 31, 2016 will be included in income for the 2017 tax year.
• Write off any obsolete inventory as of year-end.
• If you are planning on upgrading your computer or any other business equipment (machinery, vehicles, etc.), try to do so before year-end. This will also allow you to take advantage of any holiday promotions that are in effect and in most cases you can write off up to the entire purchase amount (against profits) for the 2016 tax year. If you are facing a profitable year and therefore, higher taxes, this could offer an instant last-minute deduction for your business.

With the new administration coming into Washington in January, there has been a lot of discussion in the news about changes to the tax code.  It has been my experience from preparing these end of the year tax tips that not much actually changes from year to year, so we will just need to wait and see what/if anything, does happen in the coming year to the current tax code.

For now, below is a list of tax credits/provisions that are currently set to expire on December 31, 2016, but of course may be renewed before next tax year is complete:

• Credit for two-wheeled, plug-in electric vehicles
• Credit for construction of new energy efficient homes
• Discharge on indebtedness on principal residence excluded from gross income of individuals
• Premiums for mortgage insurance deductible as interest that is qualified residence interest
• Energy efficient commercial buildings deduction
• Deductions for qualified tuition and related expenses (There are still other education tax credits available)

Please remember, the information above contains general tax-savings information and it may or may not apply to your particular situation. It is strongly advised that you contact Shurek Accounting & Tax or your own tax adviser before making any of the moves listed above if you are not sure as to their deductibility.

Shurek Accounting & Tax would like to thank you for your business this past year and we hope that you and your family have a safe and enjoyable holiday season.