Tax Reform Likely in 2017? Strategies You Should Consider for Year-end Tax Planning
Tax reform will likely be a priority for President-elect Donald Trump and the Republican-controlled Congress in 2017 by consolidating the individual tax rates into three brackets, eliminating the 3.8% surtax on upper-earners, and potentially reducing the tax-savings impact of current deductions. With all this in mind, here are some important strategies for taxpayers to consider this year.
As the election is now in the rear-view mirror and you begin to think about year-end tax planning options, consider that tax reform is likely to be a priority for President-elect Donald Trump and the Republican-controlled Congress.
Based on preliminary policy positions from the campaign and reports in the media, we may see tax reform to produce lower tax rates coupled with a broader tax base. It has also been reported that there will be fewer deductions and credits. Trump wants to consolidate the individual tax rates into three brackets: 12%, 25% and 33%. On capital gains and other investment income, he has campaigned on eliminating the 3.8% surtax on upper-earners. With all this in mind, here are some important tax-saving strategies to consider this year:
For some wealthy families or high net worth individuals, it may make sense to increase charitable giving plans in 2016. Trump’s proposed reforms may lessen future tax-savings incentives by capping the total amount of itemized deductions allowable. If you have future charitable donation pledges or commitments, you might consider front-loading some donations for the next several years by making larger gifts before Dec. 31.
For example, if you typically make donations of $10,000 per year, you could decide to front-load your giving by making a larger donation in 2016 of $40,000. You would then be allowed to claim a $40,000 charitable donation for 2016. Talk with your financial advisor about giving programs or donor-advised funds.
Consult a Tax Pro
These are just some of the year-end tax-planning strategies to consider, based on educated guesses and policy statements from President-elect Trump’s campaign and House GOP proposals in years past. There is no certainty of tax reform or changes that will be implemented for 2017 and forward, however.
Before implementing any of these strategies, consult your tax advisor to discuss details and limitations, as well as other creative tax-saving alternatives. For more information, contact Paul Simons.