Recently, year-end tax planning has been challenging. Many tax code provisions expired, and it was uncertain whether they would be renewed, with Congress’ action potentially not coming until extremely late in the year.
Things are different in 2016. The Protecting Americans from Tax Hikes Act of 2015 was signed into law late last year, not only renewing some expired benefits but making them permanent. Other expired tax provisions were extended for multiple years.
Therefore, relatively few tax planning issues will be up in the air as the calendar turns to the fourth quarter of 2016. You will know, for example, that state and local sales tax can be deducted, instead of state and local income tax, if that is a better choice. If you are older than age 70½, or nearing that age, you can make philanthropic plans with the assurance that charitable donations directly from IRAs are permissible.
The increased assurance that certain tax benefits will be available makes year-end planning more effective. Keep in mind that, currently, the November elections have yet to be decided. We will have a new president in 2017, changes in Congress, and the likelihood that revisions in tax law will be proposed. Therefore, you should end 2016 with a plan to use current tax benefits, including those deemed to be ‘permanent,’ while they are available.