In spite of all the talk about tax reform. That won’t impact us for maybe a year.
For now all of you higher-income individuals, here are Debby’s tips for your 2016 taxes.
We know that you have worked hard for your money and would like to reap the benefits to the greatest extent possible. Your ultimate goal is to sustain a successful wealth-building strategy while avoiding unnecessary and expensive tax consequences. We are interested in helping you achieve these objectives.
For the last few years, there has been talk of major tax reform that would place an increased tax burden on higher income individuals. Some budget proposals include revenue raisers with increased taxes on high-income individuals and new taxes on foreign earnings of U.S. multinational firms. The so-called “Buffet Rule,” which would impose a minimum tax rate of 30 percent on adjusted gross income (AGI) over $1 million, is again being touted as an option, along with another increase in the top effective capital gains and dividends rate.
Although it is uncertain when or if tax reform will be enacted, it is wise to weigh your options carefully with higher tax rates looming on the horizon. Higher income individuals like you must carefully structure your financial transactions in order to minimize your tax burden.
Some of the issues that may impact your tax planning for 2016 include:
- Your marginal tax rate
- Personal exemption and itemized deduction phaseouts
- Additional 0.9 percent Medicare tax on wages and self-employment income over threshold amounts
- Net investment income tax of 3.8 percent for taxpayers with modified AGI exceeding threshold amounts
- A capital gain rate of 20 percent for taxpayers in the highest tax bracket
- Gain exclusion for small business stock acquired in 2016 or later and held for more than 5 years
- Foreign account disclosure and reporting requirements and related enforcement penalties
- In-service rollovers to designated Roth accounts without the imposition of a 10-percent additional tax on early distributions
- IRA distributions to charity of up to $100,000
- Strict rules about deducting passive activity losses (PALs)
- Alternative minimum tax (AMT)
As you can see, the more complex issues faced by higher-income individuals create a challenging planning environment for the 2016 tax filing season. We would like to meet with you to discuss the options that are best suited to meet your personal financial goals while minimizing your tax liability. Please contact our office at your earliest convenience. Call 719-548-1646 to make an appointment.
Phases Accounting and Tax Preparation
Reproduced with permission from CCH’s Client Letter, published and copyrighted
by CCH Incorporated, 2700 Lake Cook Road, Riverwoods, IL 60015.