CHICAGO (Nov. 2, 2016) – To help businesses and individuals determine the best tax strategies available, Crowe Horwath LLP has issued “Tax planning: 2016 year-end guide.” Crowe is one of the largest public accounting, consulting and technology firms in the U.S.
Last December, the Protecting Americans From Tax Hikes Act of 2015 (the PATH Act) was signed into law, which permanently extended many tax relief provisions and incentives and extended others beyond 2017 for both businesses and individuals. As a result, there is less uncertainty this year, allowing taxpayers the advantage to act now and mitigate their tax burden.
According to Gary Fox, managing partner of Crowe Tax Services, even following the PATH Act, much ambiguity remains. “The biggest driver of uncertainty for the tax planning process is the election. In a general sense, Hillary Clinton has proposed tax increases and Donald Trump has proposed decreases. Whoever wins will need to work with Congress to establish long-term tax reform, and it will likely be a long time before we know what that looks like,” he said.
The PATH Act permanently extended the research credit, which gives businesses a tax incentive to conduct research and development (R&D) activities. “The R&D credit used to expire annually and Congress often didn’t extend it until very late in the calendar year, creating a lot of uncertainty for businesses. Now, businesses can plan to conduct R&D activities throughout the year, knowing that the tax benefit to doing so remains,” Fox said. Additionally, businesses with $50 million or less in gross receipts can now claim the credit against alternative minimum tax (AMT) liability. Certain startups (generally those with less than $5 million in gross receipts) that haven’t incurred an income tax liability can use the credit against their payroll tax.
The PATH Act also permanently extended the sales tax deduction for individuals, which allows taxpayers to take an itemized deduction for state and local sales tax in lieu of state and local income tax. Fox noted that individuals should consider this when planning their tax strategies. “The sales tax deduction is always valuable for people who live in states with no or low income tax, but it can also benefit taxpayers in other states who purchase a major item, such as a car or boat,” he said. For example, an individual estimates that his state and local income tax liability is $3,000, but he also paid $3,000 in sales tax on the purchase of a car. Opting to take the sales tax deduction would allow him to deduct all of the sales tax he paid throughout the year, in addition to the car, further decreasing his tax liability.
“Tax planning: 2016 year-end guide” includes information on income and deductions, family and education, investments, business, retirement, estate planning and tax rates. To download the guide, please visit: www.crowehorwath.com/yearend-NR.
About Crowe HorwathCrowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting, and technology firms in the United States. Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk, and performance services. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in more than 120 countries around the world.