2017 Year-end Tax Planning with Pending Legislation for Individuals

During these uncertain times of pending tax legislation, it can be difficult to determine appropriate action to perform effective tax planning*. There may be year-end strategies that can be employed in late December as it becomes clearer from Congress which provisions of each bill will be final. Despite the uncertainty, it is important for taxpayers to be ready to execute strategies for effective tax planning.

Key areas for consideration this tax season include potential tax reform, identity theft concerns, and increased scrutiny of foreign reporting, and this isn’t expected to change any time soon. Some of the major changes for individuals are identified below, starting with the rates.

Tax Rates: Both versions of the bill call for a change in tax rates. For some taxpayers, the rates may be higher and for some lower, depending on the amount and type of taxable income they are reporting. Simply having a higher marginal rate suggests that the tax on each incremental dollar of ordinary income would be subject to that higher rate. Under both versions of the bill, flow-through income from businesses (partnerships, S corporations, and sole proprietorships) will be subject to a different rate structure. It is expected that the long-term capital gains and qualified dividend rates will not change under either version of the bill. Absent non-tax cash-flow considerat