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6 Midyear Tax Planning Tips

June 21, 2016

Tax season has come and gone, but don’t underestimate the value of proactive tax planning; use your summer to capitalize on tax breaks under the PATH Act of 2015.

Our recent eBook: “2015 PATH Act: What all Taxpayers Need to Know” points out several tax perks made permanent by the Protecting Americans from Tax Hikes Act of 2015. At this point in 2016, you might be wondering what you can do to ensure that you and your business are capitalizing on all available tax perks—That’s where we can help.

3 reminders for individuals

  1. Need a new car?- If you’re in the market for a new vehicle, now might be the time. There is an alternate tax deduction available for those who itemize deductions on their federal income tax returns. It was made permanent by the PATH Act of 2015 and allows you to deduct state and local sales taxes paid for the year, which is beneficial both for taxpayers in areas with low or no state or local income taxes, and especially taxpayers who made large purchases during the year (cars, boats, etc.)
  2. Tax breaks for students- As mentioned in our eBook, there are benefits available to college students and their parents, including the American Opportunity Tax Credit, the tuition and fees deduction and Section 529 savings plans. To qualify for these deductions, you must consider your income level—both the American Opportunity and Tuition and fees deductions are subject to phase-outs based on what tax bracket you are in. There's a planning opportunity to shift the benefit between the parent and the student to see who gets the greater benefit. Before filing returns, be sure to discuss with your tax advisor.
  3. Energy-saving equipment installation-Only guaranteed to last through 2016—Act fast! Dreading the summer heat? You might consider installing a central air conditioning system in your home; there is a tax credit available for you in the amount of 10% of the cost of a qualified energy-saving improvement. Keep in mind, however, that if you’ve already claimed the credit in a prior year, your current year credit will be less (There is a lifetime credit limit of $500).

3 reminders for small businesses

  1. Qualified small business stock for C corporations - If your business is short on funds, consider issuing QSBS. If the investor holds the stock for at least five years, and at least 80% of your corporate assets are actively used for business purposes, 100% of the gain from a sale of the stock will be free from tax to the investor.
  2. Work opportunity tax credit- Summer is a popular time to hire new employees; If you are in a business that might have you hiring individuals in certain “target groups” like food stamp recipients and veterans, you can acquire up to $2400 per employee in the form of WOTC.
  3. Equipment purchases- If you are looking to improve your premises as a summer project, you can qualify for a tax break reinstated and made permanent through the PATH Act, which reduces the recovery period of the cost of building improvements by 24 years (from 39 to 15). This permanent break is applicable to improvements made to qualified leasehold, restaurant or retail properties.

By no means is this a full list of the available tax breaks made possible by the PATH Act of 2015; make sure you contact your tax advisor to find out how you can get a head-start on tax planning this summer…and don’t forget to download our eBook.

Questions? Contact any member of our Tax Services Team.

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