2A — December 23 - January 12, 2017 — M id A tlantic
Real Estate Journal
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IC-B Stout & Caldwell Engineers, LLC ..........................9B SUBWAY..................................................................10A Total Cleaning Associates Ltd..................................2B Whitesell....................................................................4A Withum. ...................................................................15B Wohlsen Construction.............................................30C MA REJ A dvertisers D irectory
M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher .................................................................Linda Christman Publisher ....................................................................Joe Christman Senior Editor/Graphic Artist ..................................... Karen Vachon Production Assistant/Graphic Artist ............................... Julie King Associate Publisher ....................................................... Kim Brunet Associate Publisher .............................................. Barbara Holyoke Associate Publisher .....................................................Steve Kelley Associate Publisher ..................................................Lea Christman Office Manager .........................................................Joanne Gavaza Contributing Columnists. .. Robert Charron; Jonathan Curry-Edwards Mid Atlantic R eal E state J ournal ~ Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockand, MA 02370 USPS #22-358 | Vol. 28 Issue 24 Subscription rates: $99 - one year, $198 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Robert H. Charron
Jonathan Curry-Edwards
Five Tax Planning Tips to Consider Before the New Year ax planning is a year- round endeavor, but several year-end strat- egies might reduce your 2016 tax bill. It is important to note that these tax planning tips are based on existing law – with president-elect Donald Trump taking office in Janu- ary substantial changes may be coming. Here are five to consider: 1. Defer income, acceler- ate deductions. You may be able to lower your 2016 income taxes by deferring in- come to 2017 or accelerating deductions into 2016. To defer income, for example, ask your employer to pay your year-end bonus in early 2017. To accel- erate deductions, prepay your property taxes, state income taxes or January mortgage payment in December. Cau- tion! Certain deductions are included in the Alternative Minimum Tax (AMT) calcula- tion. Consult your tax advisor to determine how much, if any, provide a tax benefit. The tax plan proposed by Trump would repeal the AMT. The most effective way to accelerate deductions is to make contributions to an IRA or other retirement plan, provided you haven’t already reached the 2016 limit. De- pending on the type of plan, your contributions may be due by December 31, whereas for others you may be able to make 2016 contributions as late as your filing deadline, with extensions. For tradi- tional IRAs, the filing deadline is the due date of the return without extension. Deferring income and accel- erating deductions isn’t right for everyone. So, if you expect to be in a higher tax bracket next year, you may be better off accelerating income into 2016, when your marginal tax rate is lower, and defer- ring deductions to 2017, when T
they’ll do more good. Certain deductions are more valuable if you bunch them together in a single year. Medical expens- es, for example, are deductible only to the extent they exceed 10% of your adjusted gross income (AGI) (7.5% if you or your spouse is 65 or older). If you won’t reach that level this year, consider putting off op- tional medical care until next year, when you stand a better chance of exceeding the AGI threshold. Most tax practitio- ners believe that taxes will be lower next year for the majori- ty, but not all, of taxpayers. In addition, the Trump tax plan would cap itemized deductions at $200,000 for joint filers ($100,000 for single filers). 2. “Harvest” investment losses. This year, long-term capital gains are taxed at rates as high as 20% at the federal level — 23.8% if you’re subject to the net investment income tax (NIIT). If you recognized capital gains this year you may be able to reduce your capital gains tax and the NIIT by selling poor-performing investments at a loss. You can use those losses to offset capi- tal gains, and up to $3,000 in ordinary income. Any losses in excess of the $3,000 allowable amount are “carried forward” for you to use in subsequent years. Be careful of the wash sale rules which disallow the loss from the sale of a security if you acquire it within 30 days before or after the sale. In ad- dition, Trump’s proposed tax plan would repeal the NIIT. 3. Avoid estimated tax penalties. If you’re behind on estimated tax payments, you may be able to catch up and avoid penalties on your 2016 return by increasing withhold- ings on your remaining wages and retirement distributions — or, if you file jointly, on your spouse’s remaining wages — for the year. Unlike estimated
tax payments, taxes withheld from wages are treated as if they were paid throughout the year, regardless of when they’re actually withheld. 4. Donate to charity. Mak- ing charitable donations before year end can reduce your 2016 tax bill. An effective strategy is to donate appreciated stock or other securities that you plan to sell anyway. That way, you’ll enjoy a charitable tax deduction for the security’s full market value (subject to certain limitations), while avoiding capital gains tax and the NIIT on its appreciation in value. Or, if you’re consider- ing donating securities that have lost value, you’re better off selling them and donating the cash to charity. Otherwise, you’ll miss out on the chance to deduct the capital loss. 4a. Qualified charitable distribution. If you need to take Required Minimum Dis- tributions (RMD) from your IRA before year-end, consider making a qualified charitable distribution (QCD). A QCD is a distribution directly from your IRA custodian to a quali- fied charity and counts to- wards satisfying your RMD up to $100,000. Unlike RMD withdrawals, QCDs are not included in your taxable in- come which helps maximize deductions that are subject to income thresholds. 5. Watch out for deduc- tion limitations. Note that deduction limitations for high- income taxpayers may reduce the effectiveness of certain strategies. Many itemized deductions are phased out, for example, once your AGI reach- es a certain threshold. In 2016, the threshold is $259,400 for single filers and $311,300 for joint filers. If you might be subject to the alternative minimum tax (AMT) this year or next, consider the potential continued on page 14A
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