Year-end tax planning for 2017 - Case | Sabatini · 2017. 11. 30. · 1 Year-end tax planning for...
Transcript of Year-end tax planning for 2017 - Case | Sabatini · 2017. 11. 30. · 1 Year-end tax planning for...
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Year-end tax planning for 2017Things to consider
Case | SabatiniContact information:470 Streets Run RoadPittsburgh, PA 15236412.881.4411CaseSabatini.com
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Reminder about due dates
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• Form 1065(Partnership)
• Form 1120S(S corporation)
March15
• Form 1040(Individual)
• FinCEN Form 114(Foreign bank reporting)
April17
• Form 1120(C corporation)
April15
• Form 1041(Trust and estate)
April17(Extend until
Sept. 17)(Extend untilOct. 15)
(Extend untilOct. 15)
(Extend untilOct. 1)
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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 expensesfor taxpayers over the age of 65
• Above-the-line deduction for qualified tuition and fees
• 10% credit for qualified energy property
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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–$444,550
39.6% $418,401 and up $470,701 and up $444,551 and up
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Dividend and capital gains rates unchanged
• The top tax bracket for dividendsand capital gains is 20%(23.8% if the net investmentincome 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%)
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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
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Itemized deductions• Limited for high-income taxpayers (note that this is proposed
to be repealed)
• 3% reduction once AGI exceeds the threshold (samethreshold 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 othermiscellaneous deductions
– Casualty or theft losses
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Affordable Care Act provisions
• Fee increase for uninsured
• 2017: Higher of 2.5% of yearly household income or $695 per person($347.50 per child under 18)
• Premium tax credit
• Household income between 100%and 400% of federal poverty line
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Review of net investment income tax (NIIT)
• Additional 3.8% tax
• Affects individuals, estates and trusts with income abovecertain thresholds
• Capital gains, interest and dividends
• Net rental and royalty income
• Income from passive activities
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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 2018
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Retirement planning
401(k)/403(b):
• $18,000 ($18,500 for 2018) + $6,000for 50 and over
IRA:
• $5,500 + $1,000 for 50 and over
Roth IRA:
• Income limits on contributing, butanyone can convert retirement fundsto a Roth
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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
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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
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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
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State and local tax issues
• Consider state/federal tax differences
• Additional filing requirements
• Credit for taxes paid in other states
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Planning now to avoidunderpayment penalties
• Estimated tax payments/withholding
• Preparing for balances due in April
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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
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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 morethan one year.
• Consider contributing to a donor-advised fund.
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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.
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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
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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
• HVAC placed in service after 2015 is eligible.
• Bonus depreciation of 50% of basis of qualifying property
• Per current law, percentage phases down in 2018, 2019
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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 pensionplan start-up credit.
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Protect yourself from identity theft• Individuals
– Protect your information.
– Shred your mail.
– Don’t be fooled by “phishing” or other phone or email scams.
– Check your credit report regularly.
– Contact all three reporting agencies as soon as you have a breach.
• Businesses
– Develop/updatesecurity plan.
– Only collect what youneed for as long asyou need it.
– Secure your network.
– Train and restrict access.
– Audit regularly.
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Planning opportunities
Complexity = possible savings opportunities
Consider evaluating tax structure.
A CPA can provide financial planning services.
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Questions
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