With Tax Day looming, maximize your individual and business tax deductionsMarch 21, 2017
As individuals and businesses prepare to file their 2016 tax returns by April 18th, this could prove to be something of an end of an era in terms of tax policy. President Trump has talked about proposing sweeping changes to the nation’s tax code—including condensing tax brackets, eliminating the estate tax, eliminating the Alternate Minimum Tax and reducing the corporate tax rate—so at this time next year, the landscape could look dramatically different.
But in the meantime, with the deadline approaching, there are a number of opportunities for possible deductions and credits of which people should take note, whether they are filing personally or on behalf of their business. The current tax code, both at the federal and state level, is filled with possibilities for potential savings; people simply need to be aware they are there.
Business Tax Deductions
On the business side, one of the priorities should be to take advantage of accelerated depreciation, both through Internal Revenue Code (IRC) Section 179—which allows for an expensing of certain asset purchases—and the 50% bonus depreciation; both could lead to ample tax savings. Incidentally, IRC Section 179 is another area which could see enhancement under the Trump Administration, as the President has proposed enhancing—possibly even doubling—the small business deduction next year.
Businesses also need to make sure payments are made to pension plans prior to filing of their 2016 tax returns in order to get the deduction in 2016—sometimes a common mistake occurs when people wait until after the filing to make the payment, which results in the deduction no longer being valid that tax year. For manufacturers and construction companies, they should be mindful to take advantage of IRC Section 199, which allows for a deduction of domestic production activities, as well as the R&D tax credit and the work opportunity tax credit. All could prove beneficial this filing season.
Individual Tax Deductions
On the individual side, two very critical deductions people should take full advantage of are for college tuition and day care expenses; these can both prove to be considerably beneficial. Individual filers should also be mindful to make all IRA and Roth IRA contributions prior to April 18th in order to get the full deduction benefit in 2016.
Other individual tax deductions include:
- Health Savings Account contributions made before April 18th
- Non-cash charitable contributions
- Cash charitable contributions – a reminder that if more than $250 is given to a qualified organization, you should obtain a letter from the organization
- Teacher expenses – up to $250 is deductible
The tax rules frequently change as leadership atop the Executive and Legislative Branches goes through changes; seldom does a year go by with no substantive changes. Even so, given the focus on taxes during the 2016 election, it is entirely possible a major change is coming in terms of federal tax policy next year. Businesses and individuals should keep this in mind as they file for this year and plan for 2017—major changes could lead to major opportunities for tax savings.
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Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.