Seward & Bellum, Attorneys at Law
Legal And Financial Guidance In Western Washington
360-602-1925

8 YEAR-END TAX PLANNING TIPS

WHAT CHANGES CAN WE EXPECT

1) Repeal of the Obamacare surtax - The Patient Protection and Affordable Care Act of 2010 surcharge is equal to 3.8% of a taxpayers "net investment income" from dividends, rents and capital gains.

2) Lower corporate income tax rates. - Currently we have the highest corporate tax rate in the world, at 38.82 %, The next highest is France at 34.43% and the lowest is the United Kingdom at 20%. Expect Trump to push for a corporate tax as low as 15%. Businesses can also expect to benefit from an election that allows fully expensing plant and equipment costs by waiving the deduction to write off interest on business loans.

3) Lower individual tax rates - Tax brackets will be reduced from 7 to 3 with tax rates at 12%, 25% or 33%, down from 39.6%.

4) Taxes on imports - You can expect higher consumer prices through tariffs on imported goods which leads to inflation which in turn leads to higher interest rates.

5) Child Care Credits - even for the wealthy. These credits are a central part of his tax reduction plan.

WHAT ARE THE KEY PLANNING TIPS FOR PROTECTING ASSETS

1) Consider deferring sales of assets such as income producing real estate as these will become more valuable if the surtax is repealed and your net proceeds after tax will be higher if the sale is deferred to 2017.

2) May make sense to use C corporations to lower your overall tax rate. With corporate tax rates at 15% and your individual rates as high as 33%, the C Corporation can be used to shelter your income from income taxes while you grow equity in your C corporation.

3) Increased job creation through government funded infrastructure type public improvements - see article by John Paul Turner below on The Power of Eminent Domain and the Government's Right to Take Your Property.

4) Protect investment accounts by diversifying into inflationary hedges and investments that do well as interest rates rise while avoiding health care and related industry investments that presents obvious risks due to the uncertainty in the industry.

5) Refinance floating rate loans to fixed rates. Lock in these historic low interest rates!

6) Defer income into 2017 and accelerate expenses into 2016. Income will be taxed at lower rates and expenses taken in 2016 will be more valuable.

7) Defer gains on sales and even consider a 1031 exchange on sales of real estate assets. Even the sale of a conservation easement qualifies as a sale of a "real property interest" that would allow the net proceeds to be reinvested in income producing real estate assets with the rental income being spared of the surtax charge.

8) Defer major capital equipment purchase to 2017 to take advantage of the write-offs. Pay cash if possible to avoid the loss of the business interest deduction.

General Recommendations - We can expect change and with change comes uncertainty, which makes investors nervous and more cautious, so it is a good time to re-evaluate your investment portfolio to make sure you have good diversification, including assets and liabilities that grow in value as interest rates increase, such as adjustable rate assets (adjustable rate bonds or annuities) and fixed rate liabilities (on your home loan, for example). Time to lock in these historically low interest rates!


Or, alternatively, taxable income minus a threshold amount of $250,000 for married couples filing jointly, $125,000 for single filers, and $200,000 for all others.

No Comments

Leave a comment
Comment Information

Contact

Port Orchard Office
2299 Bethel Road SE
Ste. 201
Port Orchard, WA 98366

Phone: 360-602-1925
Fax: 360-443-4296
Map & Directions

Seattle Office
1001 4th Ave.
Ste. 3200
Seattle, WA 98154

Phone: 360-509-4329
Map & Directions