Friday, December 30, 2016
Volume 3, Issue #2
Good morning… I hope that everyone enjoyed Christmas and is looking forward to the new year. It’s been quite a while since we wrote to you so let’s get right to it.
Kimberly is half way through her Junior year and has achieved the Dean’s list again. She is taking the time now to contemplate her next steps after college. The boys are fine, moving forward with their lives here in Pennsylvania and Washington. The family has taken a momentous step and joined Orange Theory Fitness Program in Blue Bell. We’ve kicked butt in 2016 and look forward to 2017 to achieve even greater success.
In the six months since we last published this letter, the stock market has increased from 17,949 to 19,763, an increase of 10.1%, due mainly to the results of the election.
While this years’ tax rules are set in stone, you can look forward to some major changes in 2017 due to a Republican controlled Congress and Donald Trump as our president. More on that later, so let’s look at the current environment.
- Payroll: W-2s and 1099s are now due to be filed with the government on January 31, 2017, the same as when they are due to the individuals. This supersedes the old due dates of February 28 and March 31.
- Individual taxes: Standard mileage rates have decreased $.05 to $.535 per mile. Taxpayers must now supply documentation concerning certain tax credits, i.e. earned income, child and American Opportunity credits. Standard deductions increase a bit along with personal exemptions and the high-income itemized deduction phase-out. AMT limits increase along with the deductible amount of long term-care premiums. However, this is the final year for the 7.5% ceiling on medical deductions for taxpayers over 65, it increases in 2017 to 10% for everyone.
- Business taxes: Social security wage base increases from $ 118,500 to $ 127,200 while the rate stays the same. Businesses can deduct up to $ 510,000 of new assets purchased in 2016.
TRUMP’S TAX LEGACY
With a President and a Congress bullish on tax changes, we can expect a crazy year on the tax horizon. The odds of reform are at an all-time high. Here are the highlights of things that may be coming down the pike:
- Business taxes are too high (35%)...Trump wants them cut to 15% but a more likely scenario would be 25%. However, for this to happen, many of the corporate breaks would have to be repealed. If this happens, keep on the lookout for this firm to be contacting our clients who are currently Subchapter “S” companies to review their filing status and perhaps move them to a more conventional “C” corporation.
- Individual tax rates would be reduced to three categories: 12%, 25% and 33% with the abolishment of the AMT, Medicare surtaxes and the estate tax. Again, for this to happen, many tax breaks would have to be cut. As an example, preliminary illustrations have the medical and tax deductions eliminated, while saving charitable contributions and mortgage interest.
- Obamacare will be on the chopping block. Trump and many Congressman want to eliminate large pieces of the legislature. However, because Obamacare is entrenched in the tax laws, any changes made will need to be reviewed from the tax perspective.
With identity theft on the minds of all, the IRS has created a W-2 program to assist in fighting the problem. W-2s will be coming out with a 16-digit verification code to be used when filing their returns electronically. These codes will be matched up with those reported by payroll companies. Last year, some 1.5 million taxpayers used the code with a great level of success, with the goal to achieve 50 million by the end of 2017.
As always, call with any questions...
Drotar Financial Consultants
Volume 1, Issue #1
Volume 1, Issue #2
Volume 1, Issue #3
Volume 1, Issue #4
Volume 1, Issue #5
Volume 1, Issue #6
Volume 1, Issue #7
Volume 1, Issue #8
Volume 1, Issue #9
Volume 2, Issue #1
Volume 2, Issue #2
Volume 3, Issue #1
Volume 3, Issue #2