Tuesday, December 6th, 2016
Whether you didn’t save as much for retirement as you would have wished earlier in your career or you’d simply like to make the most of tax-advantaged savings opportunities, if you’ll be age 50 or older on December 31, consider making “catch-up” contributions to your employer-sponsored retirement plan by that date. These are additional contributions beyond the regular annual limits that can be made to certain retirement accounts.
401(k)s and SIMPLEs
Under 2016 401(k) limits, if you’re age 50 or older, after you’ve reached the $18,000 maximum limit for all employees, you can contribute an extra $6,000, for a total of $24,000. If your employer offers a Savings Incentive Match Plan for Employees (SIMPLE) instead, your regular contribution maxes out at $12,500 in 2016. If you’re 50 or older, you’re allowed to contribute an additional $3,000 — or $15,500 in total for the year.
But, check with your employer because, while most 401(k) plans and SIMPLEs offer catch-up contributions, not all do.
If you’re self-employed, retirement plans such as an individual 401(k) — or solo 401(k) — also allow catch-up contributions. A solo 401(k) is a plan for those with no other employees. You can defer 100% of your self-employment income or compensation, up to the regular yearly deferral limit of $18,000, plus a $6,000 catch-up contribution in 2016. But that’s just the employee salary deferral portion of the contribution.
You can also make an “employer” contribution of up to 20% of self-employment income or 25% of compensation. The total combined employee-employer contribution is limited to $53,000, plus the $6,000 catch-up contribution.
Catch-up contributions to non-Roth accounts not only can enlarge your retirement nest egg, but also can reduce your 2016 tax liability. And keep in mind that catch-up contributions are available for IRAs, too, but the deadline for 2016 contributions is later: April 18, 2017. If you have questions about catch-up contributions or other retirement saving strategies, please contact us.
Monday, December 5th, 2016
Thank you to our clients for attending the CAFR Preparation seminar today and tomorrow at the Covington Fire Station! A special thank you to the City of Covington for your hospitality!
Wednesday, November 30th, 2016
Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. To ensure your donations will be deductible on your 2016 return, you must make them by year end to qualified charities.
When’s the delivery date?
To be deductible on your 2016 return, a charitable donation must be made by Dec. 31, 2016. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?
The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:
Check. The date you mail it.
Credit card. The date you make the charge.
Pay-by-phone account. The date the financial institution pays the amount.
Stock certificate. The date you mail the properly endorsed stock certificate to the charity.
Is the organization “qualified”?
To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.
The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.
Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2016 tax bill.
Tuesday, November 29th, 2016
Seventeen grateful gobblers from our Chattanooga office ran, walked and wobbled across the finish line of the 17th Annual Grateful Gobber Walk 5K. The event took place Thanksgiving morning at Coolidge Park in Chattanooga.
The event was especially exciting this year as 100% of the proceeds of the walk benefited the Maclellan Shelter for Families. The shelter is an emergency homeless shelter located on site at the Community Kitchen on 11th Street in Chattanooga. It features 13 units with 68 beds for families experiencing homelessness. The Shelter provides a stable environment for families to remain together as they search for permanent housing solutions.
Wednesday, November 23rd, 2016
A federal judge in Texas has issued a preliminary injunction halting the implementation of the new overtime rules that have been scheduled to go into effect on December 1. Below is a link to an article about the injunction.
Wednesday, November 23rd, 2016
Smart timing of deductible expenses can reduce your tax liability, and poor timing can unnecessarily increase it. When you don’t expect to be subject to the alternative minimum tax (AMT) in the current year, accelerating deductible expenses into the current year typically is a good idea. Why? Because it will defer tax, which usually is beneficial. One deductible expense you may be able to control is your property tax payment.
You can prepay (by December 31) property taxes that relate to 2016 but that are due in 2017, and deduct the payment on your return for this year. But you generally can’t prepay property taxes that relate to 2017 and deduct the payment on this year’s return.
Should you or shouldn’t you?
As noted earlier, accelerating deductible expenses like property tax payments generally is beneficial. Prepaying your property tax may be especially beneficial if tax rates go down for 2017, which could happen based on the outcome of the November election. Deductions save more tax when tax rates are higher.
However, under the President-elect’s proposed tax plan, some taxpayers (such as certain single and head of household filers) might be subject to higher tax rates. These taxpayers may save more tax from the property tax deduction by holding off on paying their property tax until it’s due next year.
Likewise, taxpayers who expect to see a big jump in their income next year that would push them into a higher tax bracket also may benefit by not prepaying their property tax bill.
Property tax isn’t deductible for AMT purposes. If you’re subject to the AMT this year, a prepayment may hurt you because you’ll lose the benefit of the deduction. So before prepaying your property tax, make sure you aren’t at AMT risk for 2016.
Also, don’t forget the income-based itemized deduction reduction. If your income is high enough that the reduction applies to you, the tax benefit of a prepayment will be reduced.
Not sure whether you should prepay your property tax bill or what other deductions you might be able to accelerate into 2016 (or should consider deferring to 2017)? Contact us. We can help you determine the best year-end tax planning strategies for your specific situation.
Monday, November 21st, 2016
M&J was proud to sponsor and attend the 64th Military Appreciation Luncheon last week. This was a celebration of Cobb Counties military community and recognition of the service and sacrifices of our men and women in uniform. Thank you to all who have served and are currently serving!
Thursday, November 17th, 2016
Now that Donald Trump has been elected President of the United States and Republicans have retained control of both chambers of Congress, an overhaul of the U.S. tax code next year is likely. President-elect Trump’s tax reform plan, released earlier this year, includes the following changes that would affect individuals:
- Reducing the number of income tax brackets from seven to three, with rates on ordinary income of 12%, 25% and 33% (reducing rates for many taxpayers but resulting in a tax hike for certain single filers),
- Aligning the 0%, 15% and 20% long-term capital gains and qualified dividends rates with the new brackets,
- Eliminating the head of household filing status (which could cause rates to go up for some of these filers, who would have to file as singles),
- Abolishing the net investment income tax,
- Eliminating the personal exemption (but expanding child-related breaks),
- More than doubling the standard deduction, to $15,000 for singles and $30,000 for married couples filing jointly,
- Capping itemized deductions at $100,000 for single filers and $200,000 for joint filers,
- Abolishing the alternative minimum tax, and
- Abolishing the federal gift and estate tax, but disallowing the step-up in basis for estates worth more than $10 million.
The House Republicans’ plan is somewhat different. And because Republicans didn’t reach the 60 Senate members necessary to become filibuster-proof, they may need to compromise on some issues in order to get their legislation through the Senate. The bottom line is that exactly which proposals will make it into legislation and signed into law is uncertain, but major changes are just about a sure thing.
If it looks like you could be eligible for lower income tax rates next year, it may make sense to accelerate deductible expenses into 2016 (when they may be more valuable) and defer income to 2017 (when it might be subject to a lower tax rate). But if it looks like your rates could be higher next year, the opposite approach may be beneficial.
In either situation, there is some risk to these strategies, given the uncertainty as to exactly what tax law changes will be enacted. We can help you create the best year-end tax strategy based on how potential changes may affect your specific situation.
Tuesday, November 15th, 2016
The 17th Annual Grateful Gobbler Walk 5K will take place once again on Thanksgiving morning. Walkers will gather at Coolidge Park for festivities before the 8:00 a.m. start. The event is especially exciting this year as 100% of the proceeds of the walk will benefit the Maclellan Shelter for Families, an emergency homeless shelter located on site at the Community Kitchen on 11th Street in Chattanooga.
The shelter features 13 units with 68 beds for families experiencing homelessness, and provides a stable environment for families to remain together as they search for permanent housing solutions. From now through the month of November, Grateful Gobbler volunteers will be present throughout the community seeking your support for the Shelter. Please consider taking a moment today to find a way you can be involved. 100% of all registration fees, sponsorships, and donations to the 2016 Grateful Gobbler will directly benefit homeless families, guaranteed!
For more information about the Grateful Gobbler visit gratefulgobbler.org .
Monday, November 14th, 2016
Pictured (L to R): Jeff Fucito, Donny Luker, Greg Morgan
The Nov/Dec issue of Current Accounts is now available online. http://bit.ly/GSCPACA. Articles from this issue include:
> Generational Transfers of Firm Value Succession Planning
> New Marriage Laws and Tax Code Changes
> FASB Not-for-Profit Reporting Changes
> The Importance of Insurance and What Should Be Included
> Secure Your Computers and Data: It Can Be Done
> The Department of Labor Fiduciary Standard: Considerations for CPAs
> What Happens to My Clients When I Die?