#MIDDLEBURY #TAXES
by Mark A. Burns
With Donald Trump having won the election and with the Republican party controlling Congress, there is a good chance we will see some tax changes going forward. So what can we expect? There is a good chance we will see lower tax rates in the future, both for individuals and businesses. This includes both ordinary income tax rates as well as capital gains tax rates.
So what should you do about that? You might want to consider deferring income from 2016 into 2017 or future years. For example, will you be receiving a year-end bonus before Dec. 31? If so, will your employer consider paying it to you in early 2017 instead? Now keep in mind that what is best for you on the income side may or may not be best for your employer on the deduction side. Also, if you are considering generating some capital gains before year end, you may want to hold off, but don’t lose sight of the possibility your assets could drop in value before you sell them.
Conversely, your tax deductions may be worth more in 2016 than in future years. So you might want to consider accelerating some tax deductions before year end. This might include your Jan. 1 real estate taxes or mortgage payment – or discretionary charitable contributions. Also, if you have a business, you might want to pay some additional expenses before year end. Furthermore, you might want to consider maximizing contributions into a retirement plan for 2016.
Now there are no guarantees tax reform will occur in 2017, or if it does to what extent and what the effective date will be. But it is highly unlikely the above-mentioned possible tax savings steps could result in a negative net tax result to you.
Also, if true tax simplification is going to take place, then you might see some tax deductions eliminated or reduced in the future. For example, some proposals would result in only mortgage interest and charitable contributions being allowed. Of course, if you are in a lower tax bracket this presumably still will result in a lower overall tax liability for you.
Finally, you need to be aware that if you will be negatively affected by the Alternative Minimum Tax (AMT) in 2016, then you may not actually get a tax benefit by accelerating certain tax deductions into 2017.
And by the way, that is another possible favorable tax benefit that could occur in the future – the elimination of the AMT, which Republicans have been pushing for in the past and which also is part of President-elect Trump’s tax plan.
The above is a very general overview of what can be a very complicated subject. Each person’s particular situation can be unique. Always consult a tax professional if you are uncertain about how tax matters might affect you.
Mark A. Burns, M.B.A., is a C.P.A. with Diversified Financial Solutions PC in Southbury. He can be reached at 203-264-3131 or Mark@DFSPC.biz.
