Finally! Many temporary tax provisions have been made permanent. Other tax provisions have been extended through 2016. Because of these vast tax law changes, perhaps a planning session is in order to reduce your potential tax liability.
The passage of another extensive tax bill in late 2015 brings numerous changes in tax law that run through 2016 and beyond. Add changes already built into the tax code and you have a tax year that requires attention from virtually every taxpayer to ensure you do not pay taxes that are not required. Here are some key items that may warrant a review of your situation.
1. Permanence in oft-extended tax laws. Thankfully you now have the ability to plan on tax law certainty as the following laws are now a permanent part of our tax code.
- $250 Educators expense deduction.
- State sales tax as an optional itemized deduction versus taking a state income tax deduction.
- Ability for seniors to donate up to $100,000 from a qualified retirement plan to a charitable organization.
- Ability to use the American Opportunity Tax Credit for four versus two years.
Planning action: If you are a teacher, have a student in college, have no state income tax, plan to make major purchses, or wish to avoid retirement income tax then consider a planning session.
2. Take advantage of expiring tax rules. The following tax laws expire at the end of 2016. Plan now to take advantage of these soon to expire tax provisions.
- $4,000 Tuition and Fees Deduction
- Tax-advantaged debt forgiveness for certain home mortgages
- Deductibility of home mortgage insurance premiums
Planning action: If you have students, have mortgage insurance, or have a home with debt higher than appraised value you may wish to create a plan for your situation.
3. Health insurance changes. If you do not have health insurance, every month you delay in obtaining this insurance could create a meaningful tax penalty.
4. Review of your withholdings. After receiving your prior-year tax return, consider, adjusting your with holdings to ensure you do not experience an underpayment penalty. The timing of your payments plays an important role in minimizing this penalty.