Tax Planning Strategies
to Use This Year
to save money on your taxes this year? It's never too early to
start planning ahead using these proven tax planning
MAX OUT YOUR 401(K) OR
CONTRIBUTE TO AN IRA
You've heard it before, but it's worth repeating because it's
one of the easiest and most cost-effective ways of saving
money for your retirement.
Many employers offer plans where you can elect to defer a
portion of your salary and contribute it to a tax-deferred
retirement account. For most companies, these are referred to
as 401(k) plans. For many other employers, such as
universities, a similar plan called a 403(b) is available.
Check with your employer about the availability of such a plan
and contribute as much as possible to defer income and
accumulate retirement assets.
Tip: Some employers match
a portion of employee contributions to such plans. If
this is available, you should structure your
contributions to receive the maximum employer matching
If you have income from wages or self-employment income, you
can build tax-sheltered investments by contributing to a
traditional (pre-tax contributions) or a Roth IRA (after-tax
contributions). You may also be able to contribute to a
spousal IRA even when your spouse has little or no earned
Tip: To get the most from
IRA contributions, fund the IRA as early as possible in
the year. Also, pay the IRA trustee out of separate
funds, not out of the amount in the IRA. Following these
two rules will ensure that you get the most tax-deferred
earnings possible from your money.
IF YOU HAVE YOUR OWN BUSINESS,
SET UP AND CONTRIBUTE TO A RETIREMENT PLAN
Similarly, if you have your own business, consider setting up
and contributing as much as possible to a retirement plan.
These are allowed even for a sideline or moonlighting
businesses. Several types of plans are available which
minimize the paperwork involved in establishing and
administering such a plan.
USE THE GIFT-TAX EXCLUSION TO
In 2016, you can give away $14,000 ($28,000 if joined by a
spouse) per donee, per year without paying federal gift tax.
And, you can give $14,000 to as many donees as you like. The
income on these transfers will then be taxed at the donee's
tax rate, which is in many cases lower.
Note: Special rules
apply to children under age 18. Also, if you directly
pay the medical or educational expenses of the donee,
such gifts will not be subject to gift tax.
For gift tax purposes, contributions to Qualified
Tuition Programs (Section 529) are treated as completed
gifts even though the account owner has the right to
withdraw them. As such, they qualify for the
up-to-$14,000 annual gift tax exclusion in 2016. One
contributing more than $14,000 may elect to treat the
gift as made in equal installments over the year of gift
and the following four years so that up to $56,000 can
be given tax-free in the first year.
CONSIDER TAX-EXEMPT MUNICIPAL
Interest on state or local municipal bonds is generally exempt
from federal income tax and from tax by the issuing state or
locality. For that reason, interest paid on such bonds is
somewhat less than that paid on commercial bonds of comparable
quality. However, for individuals in higher brackets, the
interest from municipal bonds will often be greater than from
higher paying commercial bonds after reduction for taxes. Gain
on sale of municipal bonds is taxable and loss is deductible.
Tax-exempt interest is sometimes an element in the computation
of other tax items. Interest on loans to buy or carry
tax-exempts is non-deductible.
GIVE APPRECIATED ASSETS TO
If you're planning to make a charitable gift, it generally
makes more sense to give appreciated long-term capital assets
to the charity, instead of selling the assets and giving the
charity the after-tax proceeds. Donating the assets instead of
the cash prevents your having to pay capital gains tax on the
sale, which can result in considerable savings, depending on
your tax bracket and the amount of tax that would be due on
the sale. Additionally, you can obtain a tax deduction for the
fair market value of the property.
Tip: Many taxpayers also give
depreciated assets to charity. Deduction is for fair
market value; no loss deduction is allowed for
depreciation in value of a personal asset. Depending on
the item donated, there may be strict valuation rules
and deduction limits.
Tip: Taxpayers age 70 1/2 and
older can take advantage of tax benefits associated with
Qualified Charitable Distributions (QCDs)--IRA
withdrawals that are transferred directly to a qualified
charitable organization. See the article, Qualified
Charitable Distributions from IRAs, below, for
KEEP TRACK OF MILEAGE DRIVEN FOR
BUSINESS, MEDICAL OR CHARITABLE PURPOSES
If you drive your car for business, medical or charitable
purposes, you may be entitled to a deduction for miles driven.
For 2016, it's 54 cents per mile for business, 19 cents for
medical and moving purposes, and 14 cents for service for
charitable organizations. You need to keep detailed daily
records of the mileage driven for these purposes to
substantiate the deduction.
TAKE ADVANTAGE OF EMPLOYER
BENEFIT PLANS SUCH AS FLEXIBLE SPENDING ACCOUNTS (FSAS) OR
HEALTH SPENDING ACCOUNTS (HSAS)
Medical and dental expenses are generally only deductible to
the extent they exceed 10 percent of your adjusted gross
income (AGI). For most individuals, particularly those with
high income, this eliminates the possibility for a deduction.
However, you can effectively get a deduction for these items
if your employer offers a Flexible Spending Account (sometimes
called a cafeteria plan). These plans permit you to redirect a
portion of your salary to pay these types of expenses with
pre-tax dollars. Another such arrangement is a Health Savings
Account. Ask your employer if they provide either of these
IF SELF-EMPLOYED, TAKE ADVANTAGE
OF SPECIAL DEDUCTIONS
You may be able to expense up to $500,000 in 2016 for
qualified equipment purchases for use in your business
immediately instead of writing it off over many years.
Additionally, self-employed individuals can deduct 100 percent
of their health insurance premiums as business expenses. You
may also be able to establish a Keogh, SEP or SIMPLE IRA plan,
or a Health Savings Account, as mentioned above.
IF YOU'RE SELF-EMPLOYED, HIRE
YOUR CHILD IN THE BUSINESS
If your child is under age 18, he or she is not subject to
employment taxes such as FICA and federal unemployment taxes
from your unincorporated business (income taxes still apply).
In addition, your child may be able to contribute to an IRA
using earned income. This will reduce your income for both
income and employment tax purposes and shift assets to the
child at the same time; however, you cannot hire your child if
he or she in under the age of 8 years old.
TAKE OUT A HOME-EQUITY LOAN
Most consumer-related interest expense, such as from car loans
or credit cards, is not deductible. Interest on a home equity
loan, however, can be deductible. It may be advisable to take
out a home-equity loan to pay off other nondeductible
BUNCH YOUR ITEMIZED
Certain itemized deductions, such as medical or employment
related expenses, are only deductible if they exceed a certain
amount. It may be advantageous to delay payments in one year
and prepay them in the next year to bunch the expenses in one
year. This way you stand a better chance of getting a
A WORD ABOUT PROPER
Unfortunately, many taxpayers forgo worthwhile tax credits and
deductions because they have neglected to keep proper receipts
or records. Keeping adequate records is required by the IRS
for employee business expenses, deductible travel and
entertainment expenses, and charitable gifts and travel, and
But don't do it just because the IRS says so. Neglecting to
track these deductions can lead to overlooking them.
You also need to maintain records regarding your income. If
your receive a large tax-free amount, such as a gift or
inheritance, make certain to document the item so that the IRS
does not later claim that you had unreported income.
It's never too early to get started on tax planning for 2016
and beyond. Call the office today and find out how you can
save money on your taxes this year.
Please call the office if you would like more information
about tax planning strategies this year. Help is just a
phone call away at
SMEED CPA Adds Financial
Services To Help Clients With
Investments & Insurance
often we here at SMEED CPA are asked about financial issues
that impact our clients investments and their portfolios.
We always offered our opinion and suggestions but in order to
help our clients actually execute the changes we suggest,
SMEED has created a Financial Services division.
SMEED Financial Services, Inc. will be able to
work with both individual and business clients on their
investment portfolios and manage assets on their behalf.
SMEED Financial will include Michael Uadiale,
ACA, CPA, CGMA; and Pablo Blanco who has
recently joined SMEED and comes with over 18 years of
financial sales and advising experience with affluent
Watch your inbox and mail boxes for more specific information
on services SMEED Financial Services, Inc will make available
Would You Give Me Your
Feedback & Testimonial
on Our Hotline?
Hello it’s Michael Uadiale, CPA of
SMEED CPA Inc. We’ve just installed a toll-free
number that I would like for you to call and tell me how you
think we are doing as your CPA firm.
Just dial 800-609-9006
extension 3638 and follow the instructions. If we’ve
done a good job please let me know. And if we can
improve on anything, please mention that too.
Us Be Found on
Also as we expand our business,
we find more and more people are using
YELP and Google
to look for us by searching Brentwood accountant or
When they do this we want to
be FOUND on GOOGLE. One way you can help us
is to give us an
ONLINE REVIEW on our Google Maps/Places listing --->
or check us out at our YELP local listing
click here to go to our Google Listing for SMEED CPA and
click on the
YELP link to go there.
Scroll down to the Review area.
On either site it may say: Been here?
Rate and review
You will click on the Rate and
review link and then log in, then
give us a review!
You can choose between 1 and 5
STARS and write in what you think about the tax or accounting
work we have done for you.
It's that simple. Thank
you in advance for your help and cooperation!
As always you can call our offices if you have any
questions about these or any other accounting related issues, at
Regards, Michael Uadiale, CPA,
Managing Partner, SMEED CPA,