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Guest view: End-of-year tax tips for businesses and individuals

J. Gregory Hamm is a director of Boyer & Ritter LLC's tax services group. - (Photo / Submitted)

Before the holiday lights are packed away, you can lighten your tax bill with some simple end-of-year steps.

With guidance from your accountant, now is the time to take advantage of the many new rule changes passed in 2016, and to anticipate the litany of revisions that loom on the horizon under the new Trump Administration.

It is also prime time to look at your overall individual and corporate financial plans: Have major life changes or business developments given you reasons to modify your savings levels? Withholding? Estate plans?

To make April 15 less taxing, the following are some tips for business as well as personal taxes to keep in mind as you prepare to close the book on 2016.

For businesses

  • The PATH Act of 2015 made a number of tax incentives permanent for businesses. Among these is a charitable deduction for the contribution of food inventory. Also permanent is a 15-year straight-line cost recovery for qualified leasehold improvements, restaurant property, and retail improvements, and the reduced five-year recognition period for S Corp built-in gains tax. This last change is due to legislation that permanently extended the rule reducing to five years (from 10) the period for which an S corporation must hold its assets following a conversion from a C corporation to avoid the tax on built-in gains.
  • Pay all interest, salaries commissions, rent, and bonuses due to stockholders in December, so you can take the deduction this year. Ensure that a Form 1099 is issued for interest and rents paid to any individual in excess of $600.

Personal taxes

  • Remember that the standard deduction amounts remain $6,300 for single/married filing separately, and $12,600 for married filing jointly, but the standard deduction for heads of households rises to $9,300.

If the tax rates are lowered and simplified as President-elect Donald Trump pledged during the campaign, it may be wise to defer some income to 2017. Also keep in mind that some tax benefits get phased out depending on your adjusted gross income, such as itemized deductions, personal exemptions, and education and adoption tax credits. Therefore, you may want to defer income by holding off on taking a bonus, redeeming a savings bond, taking in debt forgiveness income or other income-generating steps.

To avoid inflating your income and possibly thrusting you into a higher tax bracket, also be wary of mutual funds that make capital gains distributions in December.

  • Make both cash and non-cash charitable contributions before the end of 2016 to get the deduction now. In certain circumstances, charitable deductions made by corporations can be accrued at year-end if paid within two and a half months.
  • Max out your retirement account contributions, especially if your company offers matching. Failing to do so is simply, and foolishly, leaving money on the table. Even if your employer does not match your retirement contributions, sequestering income in 401(k) s, IRAs and more is a wise move for both current and future income needs.
  • For Pennsylvania taxpayers with young children, don’t forget to visit PA529.com to make a one-time contribution by Dec. 31 for Pennsylvania state income tax deductions this year. Pennsylvania taxpayers can deduct up to $14,000 per beneficiary in PA 529 contributions made by Dec. 31 from their Pennsylvania taxable income on 2016 state tax returns. Married couples filing jointly can deduct up to $28,000 per beneficiary.

Many other simple moves can allow you to give more to your loved ones than to the IRS.

Although the holiday hustle and bustle can be taxing, doing nothing on the financial front can cost you dearly come tax time. A skilled accountant can show you how a few simple moves during the holiday season can help you find a greater measure of peace and joy during tax season.

J. Gregory Hamm is a director of Boyer & Ritter LLC’s tax services group and has over 20 years of experience in public accounting. He can be reached at 717-761-7210 or ghamm@cpabr.com

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