Seven Tax Moves for 2016
October 17, 2016
The national elections will surely impact personal taxes for years to come, yet it’s unlikely that a lame-duck Congress will endorse changes that will significantly impact tax planning for this year.  Here are seven tax moves that individuals may consider as 2016 comes to a close.
  1. Donate to charities: In general terms, the full amount of cash or cash-equivalent gifts donated to charitable organizations may deducted, as long as you keep proper records.The fair market value for gifts of appreciated property may also be deducted if certain requirements are met. Special limits often apply to these situations, such as a reduction in deductions for certain high-income taxpayers.
  2. Group medical expenses: Recently the threshold for deducting medical expenses was increased to 10% of a taxpayer’s AGI, or adjusted gross income.Therefore, choosing to lump any medical procedures, dental cleanings, and physical examinations into one year may prove to be advantageous.The 2016 threshold is still 7.5% of AGI for those taxpayers over 65 years old.
  3. Harvest capital gains or losses: Capital gains or losses from sales of securities are typically realized at the end of a tax year to offset each other.
  4. By-Pass AMT: The Alternative Minimum Tax, or AMT, still ensnares millions of taxpayers each year, despite repetitive calls to repeal this “stealth tax”.The AMT generally applies to taxpayers that have a large amount of “tax preference items”, especially if they live in a high-tax state.Faw Casson can perform a review to determine if you should shift income items or deductions at the end of the year.
  5. Claim college tax breaks: If you have a child in college, there are two higher education credits currently available, or you may claim a tuition-and-fees deduction.All of these alternatives are subject to phaseouts at certain income levels.Qualified expenses must be paid before 2017 to take advantage of any of these options.
  6. Share income with family: Transferring income-producing property to family members in the two lowest ordinary income tax brackets can be a beneficial move.They may benefit from the 0% rate on long-term capital gains offered.Be aware that under the 2016 “kiddie tax”, unearned income above $2,100, attributed to a dependent child under 24 years of age, is commonly taxed at the parents’ top tax rate.
  7. Take your RMDs:If you are above 70.5 years of age, you MUST take annual required minimum distributions (RMDs) from your IRAs and other qualified plans.Failure to comply before the January 1 deadline could result in a penalty of 50% of the required payment.
Each individual taxpayer is unique, so you may find that you may benefit from one or more of these situations.  Faw Casson is currently scheduling tax planning meetings.  Book your appointment today so we can review which scenarios will benefit you and your family the most.