With the end of the year approaching, I would like to review how you can make use of your stock portfolio to lower your tax bill. I will briefly discuss seven tax strategies that you can use to your advantage.
First, let’s go over some background information. Your short-term capital gains are taxed like ordinary income. This means you pay federal taxes at rates of up to 43.4 percent: the top income tax rate of 39.6 percent plus the 3.8 percent Affordable Care Act tax on investment income. You pay taxes on your long-term capital gains at rates of up to 23.8 percent (20 percent for capital gains plus 3.8 percent on investment income). And if you are in the 15 percent income tax bracket, then you pay zero taxes on long-term gains.
The goal of the strategies below is to avoid the 43.4 percent tax, and instead pay tax at the 23.8 percent or even the 0 percent rate when possible.
Please contact me if you would like to discuss any of the strategies above. I look forward to hearing from you.
Please call us if you wish to discuss this further. I can help you make the decision that benefits you the most.
One of the biggest challenges we tax planners face is anticipating how changing laws affect your taxes. Can we feel confident recommending changes today to help minimize taxes tomorrow? This year brings more uncertainty than at any time in the last decade. That's of course because Donald Trump will soon take office as President, with support from a Republican Congress.
At this point, it looks like Congress will take up corporate taxes first. Trump has called for dropping business rates to no more than 15%. In exchange, he would eliminate deferral of tax on foreign income, impose a 10% repatriation tax on accumulated profits of foreign subsidiaries, and repeal most business tax incentives other than research and design.
As for individual taxes, Trump has proposed cutting rates to a maximum of 33%, boosting standard deductions and capping itemized deductions entirely, and creating new "above-the-line" deductions for health insurance and child care costs. He has also called for repealing gift and estate taxes, alternative minimum tax, and Affordable Health Care taxes.
Trump's tax plan is projected to eliminate Personal and dependent exemptions as well as heald of household status. It could eliminate the benefit of itemizing since it is projected to increase the standard deduction anywhere from $15,000 ot $30,000 depending on your filing status.
Under Trump's plan there will only be three tax brackets and overall are projected to reduce all Americans tax burden.
With the clock ticking on 2016 and the ability to lower your tax bill coming to a close, I thought it would be helpful to bring to your attention two retirement and four medical year-end tax-reduction strategies. With the help of one or more of these strategies, you might save several thousand dollars.
The six strategies I will touch upon are as follows:
As the end of the year approaches, it’s a good time to think of planning strategies that will help lower your taxes for 2016. My goal is for you to leverage your tax deductions and credits to the fullest extent.
I want to briefly discuss five different strategies that can be powerful tools in lowering your tax bill. And the really great part is that each of these strategies is easy to understand and implement.
As the end of the year approaches, I want to explain how your vehicle may be able to provide you with big tax savings. There are various actions you can take, so examine the strategies described below and see if you can take advantage of any of them.
Just keep in mind that all actions must be completed before midnight on December 31, 2016.
Take Your Child’s or Spouse’s Car and Sell It
If you gave your old business vehicle to your child or spouse to use, then consider selling it before the end of the year. Your old business vehicle could have a big tax loss embedded in it, in which case your strategy is easy. Take the vehicle and sell it to a third party before December 31 so that you have a tax-deductible loss this year.
Replace Your Vehicle
If you’re considering replacing your business vehicle, then how you should proceed depends on whether it would sell for a gain or loss.
If the sale would result in a gain (i.e., the fair market value is greater than your undepreciated basis), it’s better to trade in the car for a different one so that it’s considered a tax-deferred Section 1031 exchange. This will allow you to avoid the taxes on the gain if you sell the vehicle.
If you prefer to sell the vehicle outright, you should engage a Section 1031 exchange intermediary in order to do so (rather than trade it in) and then buy a replacement vehicle. The exchange intermediary charges a fee and does the paperwork that makes this happen, resulting in no taxable gain this year.
If the sale would result in a loss, then you should sell the vehicle so you can benefit from this tax-deductible loss in 2016.
Put Your Personal Vehicle in Business Service
Now that lawmakers have reinstated bonus depreciation for 2016, you can use this as an effective strategy to get a big deduction. If you or your spouse owns a vehicle that you purchased new and never deducted for tax purposes, you can convert that personal car to business use to take advantage of bonus depreciation.
As long as you make the conversion by December 31, you get a deduction for bonus depreciation, which can be as much as half the fair market value on the date of conversion, depending on the vehicle.
Please contact me if you would like to discuss any of the above strategies further.
As the end of the year approaches, it’s a good time to think of planning moves that will help lower your tax bill for this year. One strategy that will provide big tax deductions is purchasing a vehicle.
If you’re looking for a replacement business car, SUV, van, or pickup truck, then now is the time to act. If you want the deductions, you need to
The “placed in service” requirement means that you must drive the vehicle at least one business mile before midnight on December 31. In other words, you want to both own and drive the vehicle to ensure that it qualifies for the big deductions.
I would like to review five categories of vehicles and what you gain with the purchase of each type. I urge you to contact me if you have any questions about the tax-saving benefits associated with each of these vehicles.
If you’re already in the market for a replacement business car, SUV, van, or pickup truck, then this is a terrific strategy to lower your 2016 taxes. Please feel free to contact me in order to calculate exactly how much you will save with the purchase of your vehicle.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.