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Year-end tax planning for 2017Things to consider

Case | SabatiniContact information:470 Streets Run RoadPittsburgh, PA 15236412.881.4411CaseSabatini.com

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Reminder about due dates

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• Form 1065(Partnership)

• Form 1120S(S corporation)

March15

• Form 1040(Individual)

• FinCEN Form 114(Foreign bank reporting)

April17

• Form 1120(C corporation)

April15

• Form 1041(Trust and estate)

April17(Extend until

Sept. 17)(Extend untilOct. 15)

(Extend untilOct. 15)

(Extend untilOct. 1)

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Expired provisions(at the end of 2016)• Exclusion of discharge of indebtedness

on principal residence

• Deduction of mortgage insurance premiums

• 7.5% AGI floor for medical expensesfor taxpayers over the age of 65

• Above-the-line deduction for qualified tuition and fees

• 10% credit for qualified energy property

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Tax brackets for 2017

Rate Single Married (filing jointly) Head of household

10% $0–$9,325 $0–$18,650 $0–$13,350

15% $9,326–$37,950 $18,651–$75,900 $13,351–$50,800

25% $37,951–$91,900 $75,901–$153,100 $50,801–$131,200

28% $91,901–$191,650 $153,101–$233,350 $131,201–$212,500

33% $191,651–$416,700 $233,351–$416,700 $212,501–$416,700

35% $416,701–$418,400 $416,701–$470,700 $416,701–$444,550

39.6% $418,401 and up $470,701 and up $444,551 and up

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Dividend and capital gains rates unchanged

• The top tax bracket for dividendsand capital gains is 20%(23.8% if the net investmentincome tax applies).

Here’s the breakdown:

0% for taxpayers in 0–15%

tax brackets

15% for taxpayers in middle-income

tax brackets

20% for taxpayers in the highest tax bracket (39.6%)

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Personal exemptions for 2017

• $4,050 per eligible person

• Phase-out starts at these AGI levels:

- Single: $261,500

- Married filing jointly: $313,800

- Head of household: $287,650

- Married filing separately: $156,900

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Itemized deductions• Limited for high-income taxpayers (note that this is proposed

to be repealed)

• 3% reduction once AGI exceeds the threshold (samethreshold as personal exemptions noted on the above slide)

• Reduction never goes above 20%

• Certain deductions must be over a threshold in order to benefit:

– Medical expenses

– Investment expenses

– Unreimbursed business expenses and othermiscellaneous deductions

– Casualty or theft losses

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Affordable Care Act provisions

• Fee increase for uninsured

• 2017: Higher of 2.5% of yearly household income or $695 per person($347.50 per child under 18)

• Premium tax credit

• Household income between 100%and 400% of federal poverty line

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Review of net investment income tax (NIIT)

• Additional 3.8% tax

• Affects individuals, estates and trusts with income abovecertain thresholds

• Capital gains, interest and dividends

• Net rental and royalty income

• Income from passive activities

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Alternative minimum tax (AMT)• Alternative tax system that parallels the regular federal tax

(with different rates and rules for deductions)

• How does it work?

– Adds back certain non-taxable income and removes some deductions

– Re-computed income is then multiplied by the applicable rate (26% or 28%) = AMT

• Higher of AMT or regular tax is paid

• Complex to calculate

• Proposed legislation to repeal beginning in 2018

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Retirement planning

401(k)/403(b):

• $18,000 ($18,500 for 2018) + $6,000for 50 and over

IRA:

• $5,500 + $1,000 for 50 and over

Roth IRA:

• Income limits on contributing, butanyone can convert retirement fundsto a Roth

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Estate and gift taxes• 2017 estate tax exemption: $5.49 million

• Proposed changes and eventual repeal

• Top rate is 40%

• 2017 gift tax annual exclusion: $14,000

• New basis reporting rules

• Estate planning is more than minimizing estate taxes.

– Updating documents

– Repurposing insurance

– Privacy

– Asset protection

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Education tax benefits

American opportunity tax credit

• Up to $2,500 for first four years post-secondary school

Lifetime learning credit

• Up to $2,000 for all post-secondary expenses

• Section 529 plans

Proposed changes with legislation

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Charitable contribution reminders

• Qualified charity

• Documentation requirements

• Donation by cash or check

– Must have proof of payment

• Cash or non-cash contributions of $250 or more

• Need “contemporaneous written acknowledgment” from the charity

• Non-cash contributions over $500

– Need details of donee organization, items donated, cost, value and more (see Form 8283)

• Non-cash contributions, including non-publicly traded stock worth over $5,000

– Need a qualified appraisal

• Clothing and household items

– Must be in good used condition or better

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State and local tax issues

• Consider state/federal tax differences

• Additional filing requirements

• Credit for taxes paid in other states

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Planning now to avoidunderpayment penalties

• Estimated tax payments/withholding

• Preparing for balances due in April

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Planning for tax reform

• Changes in rates (business, individual and qualified business income from pass-throughs)

• Expensing for depreciable assets

• Estate tax repeal

• Changes to itemized deductions

• Repeal of AMT

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Last-minute planning tips

• Consult your tax adviser about accelerating/postponing deductions/income.

• Consider 0.9% Medicare tax.

• Harvest capital losses.

• Maximize retirement savings.

• Avoid mutual fund purchases in December.

• Contribute appreciated stock held for morethan one year.

• Consider contributing to a donor-advised fund.

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Continued planning tips

• Make sure you spend all the funds in your flexible spending account (FSA).

• If enrolled in a qualified high-deductible health plan, consider fully funding an HSA.

• For self-employed individuals, remember deduction for health insurance costs.

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Top issues for small business

• Capital equipment/vehicle purchases in service by Dec. 31

• Bonus/payroll adjustments

• Bad debts

• Defer/accelerate income/deductions

• Health insurance

• Retirement planning

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Depreciation

• Property eligible for 15-year straight-line depreciation — qualified leasehold improvements; restaurant and retail improvements

• Section 179: $510K and phase out at $2,030,000 for 2017

• HVAC placed in service after 2015 is eligible.

• Bonus depreciation of 50% of basis of qualifying property

• Per current law, percentage phases down in 2018, 2019

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Small business — saving for retirement

• Savings Incentive Match for Employees (SIMPLE)

• Simplified Employee Pension (SEP) plans

• Profit-sharing plans

• A variety of 401(k) plans

• For new plans — consider small employer pensionplan start-up credit.

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Protect yourself from identity theft• Individuals

– Protect your information.

– Shred your mail.

– Don’t be fooled by “phishing” or other phone or email scams.

– Check your credit report regularly.

– Contact all three reporting agencies as soon as you have a breach.

• Businesses

– Develop/updatesecurity plan.

– Only collect what youneed for as long asyou need it.

– Secure your network.

– Train and restrict access.

– Audit regularly.

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Planning opportunities

Complexity = possible savings opportunities

Consider evaluating tax structure.

A CPA can provide financial planning services.

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Questions

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