Tax Reduction Strategies Arthur P. Ward, Jr., CPA, MT

PATH ACT impact/update Protecting Americans from Tax Hikes 50 individual and business tax deductions, tax credits and other tax-saving laws were extended.

Permanent extenders - Individual American Opportunity Tax credit $250 above the line deduction for teachers – index for inflation in 2016 Exlcusion of employer provided mass transit and parking benefits Sales tax deduction for individuals Tax free distributions to charity from an IRA of up to $100,000 per taxpayer over 70 1/2

Temporary extenders - Individual Exlusion of up to $2,000,000 of discharged principal residence indebtedness from gross income through 2016. Deduction for mortgage insurance premiums through 2016. Above the line deduction for tuition through 2016

Permanent extenders - Business Research credit 2016 R&D credit may be claimed against AMT for small business ($50 million or less in gross receipts) Low income housing credit Employer wage credit for activated military reservists 15 year straight line cost recovery for qualified leasehold improvements

Permanent extenders - Business Contribution of food inventory 15% of taxable income Section 179 made permanent $500,000 limit and $2,000,000 limit are indexed for inflation Reduction of S-corp built in gain period Exlusion of 100% gain on certain small business stock

Temporary extenders - Business Work opportunity tax credit – extended through 2019 Three-year depreciation for racehorses extended through 2016 7 year recovery period for motorsports entertainment complexes extended through 2016

Temporary extenders - Business 50% bonus depreciation 2016 through 2020 50% reduced to 40% for property placed in service during 2018 50% reduced to 30% for property placed in service during 2019

Obamacare Tax 3.8% of net investment income over $250,000 .9% of earned income over $200,000 single and $250,000 married filing joint What can be done to reduce the two above, if any? Definition of active vs. passive Document involvement in pass through entities What deductions can be taken against the net investment income?

Pease and Pep limitations Pease limitation Named after Donald Pease who introduced the legislation in 1991. Itemized deductions are reduced by the 3% of income over the threshold AGI, but no more than 80% Threshold - $309,900 MFJ, $258,250 Single PEP (Personal Exemption Phaseout) Limitation Reduces personal exemptions by 2% for each $2,500 that AGI exceeds the threshhold. Same Threshold as above

Capital gain planning Long term capital gain vs. short term capital gain Harvesting losses Coordination with Net Investment tax

Roth Conversions When does a Roth Conversion make sense? What are ways that people currently utilize nondeductible IRA contributions to contribute to a Roth?

Ohio 2015 2015 Ohio Small Business are entitled to take a 75% tax deduction on the first $250,000 of Ohio business income. Available for all owners/investors of companies structured as pass through entities.

Contact Arthur P. Ward, Jr., CPA, MT Card, Palmer, Sibbison & Co. 4545 Hinckley Parkway Cleveland, Ohio 44109-6009 216.621.6100 216.274.3228 award@cps-cpa.com Follow me on Twitter  @Tax_Warden