Your Tax Planning Checklist: Are You Well Positioned for Changes Ahead?

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With so many changes under the CARES Act, and with new administration policies yet to be determined, it’s important to note that while tax planning remains a challenge for the foreseeable future, it’s crucial to prepare for multiple scenarios and outcomes right now.

While many business owners and executives leave the complex matters of taxes and accounting to the CPA’s they entrust, it’s important to stay attuned to what’s available now, and what is predicted to change soon.  After all, it’s those who are positioned to pivot and adjust that will manage to capture the greatest benefits.

Below, K·Coe Isom’s tax advisors have created a high-level checklist of the areas which should be evaluated and might have significant impacts on your tax situation now, and in the future.

Tax Planning Checklist

  • Report Direct Stimulus Payments on Your Return – additional tax credits are available for those whose AGI in 2020 was lower than 2019.
  • Retirement Contribution Changes — traditional IRA and Roth contribution limits remain the same, but 401(k) limits have increased a bit.
  • Health Savings Account (HSA) Contribution Maximums Have Increased for 2020 – went up an additional $50 for an individual, and $100 for a family; a $1,000 catch-up contribution is still available for people age 55 and older.
  • Charitable Contribution Limitation is Relaxed – up to $300 of cash contributions to charities is allowed, with adjusted contribution limitations for both individual and corporate taxpayers.
  • Business Income Changes
    • NOLs: business losses from 2018, 2019, and 2020 can be carried back for five years, and business and corporate NOLs may fully reduce taxable income. Farm losses can be carried back either two years or five years, at the taxpayer’s election.
    • Business-related Interest Expense Limitation – deductions have a higher limit in 2020.
    • Immediate Expensing of Qualified Improvement Property Costs – the depreciable life of QIP was corrected, making any asset additions within that category eligible for bonus depreciation and Section 179 expensing.
  • Changes Ahead for Estate Taxes, Gift Policy and Income Tax Basis Rules for Inherited Property – a net worth above $3.5 million (the threshold where assets would be subject to estate tax under President Biden’s proposed plan) should consider updating estate plans. Income tax basis of inherited property is also expected to change.

Lastly, it should be noted that the IRS has extended the individual tax filing deadline to May 17.

Should you have questions regarding your current tax strategy or haven’t dusted off your estate plan in a while, now is the time to capture opportunities and benefits before they’re gone.  Contact a K·Coe advisor.

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