Now that the April 18 income tax filing deadline has passed, it is tempting to set aside any thought of taxes until year end approaches. But don’t succumb to the temptation: Now is the time to start tax planning for 2016 (and if you’re really ambitious, 2017!)
A tremendous number of variables affect your overall tax liability for the year. Starting to look at these variables early in the year can give you more opportunities to reduce your 2016 tax bill.
For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.
In other words, tax planning shouldn’t be just a year-end activity.
In recent years, early planning has been a challenge because of the uncertainty related to the extension of expired tax breaks. But the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended a wide variety of tax breaks through 2016, or, in some cases, later. It also made many breaks permanent.
For example, the PATH Act made permanent the deduction for state and local sales taxes in lieu of state and local income taxes and tax-free IRA distributions to charities for account holders age 70½ or older. So you don’t have to wait and see whether these breaks will be available for the year like you did in 2014 and 2015.
To get started on your 2016 tax planning, contact me at HZemel@berdonllp.com or your Berdon advisor. We can discuss what strategies you should be implementing now and throughout the year to minimize your tax liability.
Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.