Thursday, December 21, 2017
As I mentioned at tax seminars this fall, the tax bill that the Congress was considering and will soon be signed into law (probably on Dec. 22, 2018) did not address the provisions that expired at the end of 2016. Those provisions needed separate legislation to be in play for 2017. Well, on December 20, Senator Hatch (R-UT) introduced S. 2256 into the Senate. It's the (seemingly) annual extenders bill.
For many of the readers of this blog, here are some of the most relevant provisions that the bill would renew for 2017:
- Credit for certain nonbusiness energy property
- Credit for residential energy property (as modified)
- Qualified fuel cell motor vehicle credit
- Alternative fuel vehicle refueling property credit
- Credit for 2-wheeled plug-in electric vehicles
- Second generation biofuel producer credit under
- Credits for biodiesel fuel, biodiesel used to produce a qualified mixture, small agri-biodiesel producers, renewable diesel fuel and renewable diesel used to produce a qualified mixture
- Credit for construction of new energy efficient homes
- Credit for geothermal heat pump property, small wind property, and combined heat and power property
- 3-year depreciation for race horses two years old or younger.
- 7-year recovery period for motorsports entertainment complexes.
- Accelerated depreciation for business property on an Indian reservation.
- Special depreciation allowance for second generation biofuel plan property.
- Exclusion for discharge of indebtedness (within a limit) on a principal residence.
- Treatment of mortgage insurance premiums as deductible qualified residence interest.
- Deduction for qualified tuition and related expens
- Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
- The alternative 23.8 percent maximum tax rate for qualified timber gains of C corporations.
- Energy efficient commercial buildings deduction.
Late Year-End Planning
Much of the year-end planning deals with shifting income to next year to take advantage of lower rates and accelerating itemized deductions to this year. However, there are some other planning opportunities that can perhaps be taken advantage of over the next few days. Here are some thoughts – again each taxpayer’s situation will be different and this is not an exhaustive list of every possible opportunity.
- Wait until next year to convert a regular IRA to a Roth IRA.
- If a Roth IRA was converted to a regular IRA earlier this year, complete a recharacterization by December 31, 2017.
- Don’t bill clients until late next week or in early January to ensure that the income won’t be received until 2018 (cash basis businesses).
- For accrual businesses, take a break and complete jobs next year (not a problem for construction businesses).
- Hold-off on having debt cancelled until next year.
- As I mentioned on Monday’s post, pay the last installment of 2017 estimated taxes this month and pay 2017 real property taxes that are due next year by then end of this year.
- Pay some of next years anticipated charitable contributions and tithe and offerings this year to the extent cash flow will allow. For famers, consider additional grain gifts to charity this year.
- For taxpayers working out arrangements with creditors, delay any debt reduction until next year.
- See if medical expenses might be incurred in 2017 that will help clear the 7.5 percent of AGI floor for 2017 (maybe a year-end visit to the optometrist or dentist or getting that physical next week (after Christmas is always a great time for that) is in order instead of waiting until January). In addition, for businesses, if health insurance premiums would normally be paid in January, pay them this month.
- For taxpayers thinking about exercising an incentive stock option, it may be a good idea to wait until 2018 if alternative minimum tax might be an issue. The AMT exemption is higher next year.
- Do a like-kind exchange of qualified personal property this year. But, even if it’s not done this year, it really is of little concern because 100 percent expensing is the rule next year. Will the particular state couple? That’s always a question to ask.
- For businesses, have business meetings with clients next week to be able to write-off half of the cost of food and beverages. Do it next month and none of it is deductible.
- For taxpayers other than those on active military duty, incur moving expenses by year-end.
- Pay employee business expenses this year that would otherwise be paid in 2018.
- Birth a child (or twins or triplets, etc.) before the stroke of midnight on Dec. 31.
- Make a substantial gift to Washburn Law School's Rural Law Program before January 31.
January 10 Seminar/Webinar
On January 10 I will be joined by Prof. Lori McMillan of Washburn Law School in presenting a 2-hour seminar/webinar on the new law. This seminar is for everyone to learn how the new tax law will impact individual taxpayers and businesses. Should a business be reorganized? What about existing estate plans? How does the new pass-through tax system apply? What are the special rules for farmer and their businesses? What about cooperatives? What are the nuts and bolts of the new law?
You can register for the event here: https://www.agmanager.info/present-tax-landscape-implications-individuals-businesses-investors-and-others
The fun is just beginning. It’s beginning to look a lot like Taxmas!!