Tax Planning for 2017
I know I’m not saving enough for retirement, and I’ve heard there are some catch-up provisions out there for people like me.
If you participate in an employer-sponsored retirement plan, try increasing your contribution by 1 or 2 percent. You probably won’t miss the money and if your contribution qualifies for an employer match, you’ll be getting more “free” money. If your company doesn’t offer a qualified retirement plan, set up and contribute to an IRA instead.
For 2016, you can contribute up to $18,000 to most 401(k), 403(b), and 457 plans. If you’re 50 or over, you can contribute an extra $6,000 to help you catch up. The maximum contribution to either a traditional or Roth IRA is $5,500 or $6,500 for those 50 or older. Note: additional income restrictions apply for Roth IRA contributions.
I do crafts on the side, and I want to begin selling some of my work this year. What kind of tax issues will I face?
You may be able to turn your hobby into a business and write off business expenses. To qualify, you must be able to demonstrate that you engaged in the activity for a profit. This means conducting the activity as a business, with good records and a separate bank account. The IRS will expect your sideline business to show a profit in three out of five years, or you will have to prove your profit motive in order to deduct losses.
I’m worried that I might get tripped up by the alternative minimum tax exemption this year. What should I do?
The AMT exemption has increased to $83,800 for married taxpayers filing jointly, $53,900 for single or head of household filers, and $41,900 for married filing single filers. Originally intended as a way to prevent high-income taxpayers from not paying income taxes, it wasn’t indexed for inflation and continues to catch more and more middle-class taxpayers.
Be aware that some personal credits are no longer allowed against the AMT. These credits include the dependent care credit, credit for the elderly and permanently and totally disabled, mortgage interest credit, residential energy credits and the Hope and Lifetime Learning credits.
The IRS offers an AMT Assistant to help you figure out if you’re required to pay the AMT for the tax return you’re filing in 2017 based on your 2016 income: http://www.irs.gov/pub/irs-pdf/i6251.pdf.
My husband and I would like to give each of our grandchildren some money, but we don’t want to get caught by the gift tax. What’s the maximum amount we can give to our family?
In 2016, you can give up to $14,000 to as many people as you’d like without filing a gift tax return with the IRS. Spouses have separate annual exclusions, meaning you and your husband can each give up to $14,000 to each grandchild without triggering the gift tax. As long as each grandchild’s combined gift is less than $28,000 ($14,000 from you and $14,000 from your husband), there’s no need to file a gift tax return.
| American Institute of Certified Public Accountants
||Texas State Board of Public Accountancy