Year-end tax planning for 2017 Things to consider

Transcription

1 Year-end tax planning for 2017 Things to consider Case Sabatini Contact information: 470 Streets Run Road Pittsburgh, PA CaseSabatini.com

2 Reminder about due dates March 15 (Extend until Sept. 17) April 17 (Extend until Oct. 15) April 15 (Extend until Oct. 15) April 17 (Extend until Oct. 1) Form 1065 (Partnership) Form 1120S (S corporation) Form 1040 (Individual) FinCEN Form 114 (Foreign bank reporting) Form 1120 (C corporation) Form 1041 (Trust and estate) 2 2

3 Expired provisions (at the end of 2016) Exclusion of discharge of indebtedness on principal residence Deduction of mortgage insurance premiums 7.5% AGI floor for medical expenses for taxpayers over the age of 65 Above-the-line deduction for qualified tuition and fees 10% credit for qualified energy property 3 3

4 Tax brackets for 2017 Rate Single Married (filing jointly) Head of household 10% $0 $9,325 $0 $18,650 $0 $13,350 15% $9,326 $37,950 $18,651 $75,900 $13,351 $50,800 25% $37,951 $91,900 $75,901 $153,100 $50,801 $131,200 28% $91,901 $191,650 $153,101 $233,350 $131,201 $212,500 33% $191,651 $416,700 $233,351 $416,700 $212,501 $416,700 35% $416,701 $418,400 $416,701 $470,700 $416,701 $444, % $418,401 and up $470,701 and up $444,551 and up 4

5 Dividend and capital gains rates unchanged The top tax bracket for dividends and capital gains is 20% (23.8% if the net investment income tax applies). Here s the breakdown: 0% for taxpayers in 0 15% tax brackets 15% for taxpayers in middle-income tax brackets 20% for taxpayers in the highest tax bracket (39.6%) 5

6 Personal exemptions for 2017 $4,050 per eligible person Phase-out starts at these AGI levels: - Single: $261,500 - Married filing jointly: $313,800 - Head of household: $287,650 - Married filing separately: $156,900 6

7 Itemized deductions Limited for high-income taxpayers (note that this is proposed to be repealed) 3% reduction once AGI exceeds the threshold (same threshold as personal exemptions noted on the above slide) Reduction never goes above 20% Certain deductions must be over a threshold in order to benefit: Medical expenses Investment expenses Unreimbursed business expenses and other miscellaneous deductions Casualty or theft losses 7

8 Affordable Care Act provisions Fee increase for uninsured 2017: Higher of 2.5% of yearly household income or $695 per person ($ per child under 18) Premium tax credit Household income between 100% and 400% of federal poverty line 8

9 Review of net investment income tax (NIIT) Additional 3.8% tax Affects individuals, estates and trusts with income above certain thresholds Capital gains, interest and dividends Net rental and royalty income Income from passive activities 9

10 Alternative minimum tax (AMT) Alternative tax system that parallels the regular federal tax (with different rates and rules for deductions) How does it work? Adds back certain non-taxable income and removes some deductions Re-computed income is then multiplied by the applicable rate (26% or 28%) = AMT Higher of AMT or regular tax is paid Complex to calculate Proposed legislation to repeal beginning in

11 Retirement planning 401(k)/403(b): $18,000 ($18,500 for 2018) + $6,000 for 50 and over IRA: $5,500 + $1,000 for 50 and over Roth IRA: Income limits on contributing, but anyone can convert retirement funds to a Roth 11

12 Estate and gift taxes 2017 estate tax exemption: $5.49 million Proposed changes and eventual repeal Top rate is 40% 2017 gift tax annual exclusion: $14,000 New basis reporting rules Estate planning is more than minimizing estate taxes. Updating documents Repurposing insurance Privacy Asset protection 12

13 Education tax benefits American opportunity tax credit Up to $2,500 for first four years post-secondary school Lifetime learning credit Up to $2,000 for all post-secondary expenses Section 529 plans Proposed changes with legislation 13

14 Charitable contribution reminders Qualified charity Documentation requirements Donation by cash or check Must have proof of payment Cash or non-cash contributions of $250 or more Need contemporaneous written acknowledgment from the charity Non-cash contributions over $500 Need details of donee organization, items donated, cost, value and more (see Form 8283) Non-cash contributions, including non-publicly traded stock worth over $5,000 Need a qualified appraisal Clothing and household items Must be in good used condition or better 14

15 State and local tax issues Consider state/federal tax differences Additional filing requirements Credit for taxes paid in other states 15

16 Planning now to avoid underpayment penalties Estimated tax payments/withholding Preparing for balances due in April 16

17 Planning for tax reform Changes in rates (business, individual and qualified business income from pass-throughs) Expensing for depreciable assets Estate tax repeal Changes to itemized deductions Repeal of AMT 17

18 Last-minute planning tips Consult your tax adviser about accelerating/postponing deductions/income. Consider 0.9% Medicare tax. Harvest capital losses. Maximize retirement savings. Avoid mutual fund purchases in December. Contribute appreciated stock held for more than one year. Consider contributing to a donor-advised fund. 18

19 Continued planning tips Make sure you spend all the funds in your flexible spending account (FSA). If enrolled in a qualified high-deductible health plan, consider fully funding an HSA. For self-employed individuals, remember deduction for health insurance costs. 19

20 Top issues for small business Capital equipment/vehicle purchases in service by Dec. 31 Bonus/payroll adjustments Bad debts Defer/accelerate income/deductions Health insurance Retirement planning 20

21 Depreciation Property eligible for 15-year straight-line depreciation qualified leasehold improvements; restaurant and retail improvements Section 179: $510K and phase out at $2,030,000 for 2017 Bonus depreciation of 50% of basis of qualifying property Per current law, percentage phases down in 2018, 2019 HVAC placed in service after 2015 is eligible. 21

22 Small business saving for retirement Savings Incentive Match for Employees (SIMPLE) Simplified Employee Pension (SEP) plans Profit-sharing plans A variety of 401(k) plans For new plans consider small employer pension plan start-up credit. 22

23 Protect yourself from identity theft Individuals Businesses Protect your information. Shred your mail. Don t be fooled by phishing or other phone or scams. Check your credit report regularly. Contact all three reporting agencies as soon as you have a breach. Develop/update security plan. Only collect what you need for as long as you need it. Secure your network. Train and restrict access. Audit regularly

24 Planning opportunities Complexity = possible savings opportunities Consider evaluating tax structure. A CPA can provide financial planning services. 24

25 25 Questions

26 Thank you 2017 Association of International Certified Professional Accountants. All rights reserved.