NASHVILLE, Tenn., Nov. 30, 2016 /PRNewswire/ -- Tennessee-based LBMC professional services firm aims to help organizations become better and stay financially ahead. Individual income taxes are likely in for a major overhaul next year under President-elect Donald Trump and a Republican-controlled Congress. With these anticipated changes, April Mitchell, CPA and senior manager in the wealth advisory tax practice at LBMC, provides insight for individuals and organizations to consider as they plan for 2017. To view the complete tax guide, visit http://www.lbmc.com/resources/2016-17-individual-tax-planning-guide.
The drum has been beating for years with detailed plans from Republican leadership that call for slashing income tax rates, reducing itemized deductions, and raising the standard deduction.
President-elect Donald Trump and House Speaker Paul Ryan have proposed plans to significantly increase the standard deduction. As a result, it would be much more attractive for many filers to take the standard deduction than to itemize.
There also might be cuts in how much you can deduct through itemization. Trump's plan would cap itemized deductions at $100,000 for single filers and $200,000 for married couples. Ryan's plan would eliminate all itemized deductions except for charitable gifts and mortgage interest.
Taxpayers that itemize should discuss with a CPA some year-end strategies that take advantage of deductions while they still have value.
1. Consider pre-paying your state income tax before Dec. 31, 2016. Making the payment this year ensures the taxpayer will get the benefit of the deduction before the itemized deduction thresholds are raised.
2. Accelerate charitable donations into 2016 because donations in 2017 could have less value. Taxpayers who give heavily, but don't want the charity to get the donation this year might consider a Donor Advised Fund (DAF). These funds allow givers to take deductions for a contribution in one year, and make grants from the fund over time. They are easy to establish and inexpensive to manage.
3. Gift publicly traded securities that have been held long-term and have appreciated in value. This provides taxpayers two benefits — they receive the charitable deduction for fair market value of the security rather than the lower cost basis; and they don't have to pay capital gains tax on the eventual sale of the security. Securities can also be put in a DAF, where they can be sold tax-free and proceeds donated to charities of the donor's choice.
Overall, tax changes are in the wind, and understanding how they affect your individual situation could save you money. For more information, visit www.lbmc.com or call (615) 377-4600.