Head of household will likely be eliminated. You are now either single or married.
Personal exemptions are likely eliminated. You will not get the $4,000 ($4,050 for 2016) exemption for yourself or your dependents. Larger families with several dependent children are likely to be adversely affected while empty-nester couples could be positively impacted.
Big one if you work for an employer that has a retirement plan like a 401(k). Pre-tax 401(k), 457(b) or 403(b) contributions reduce your taxable wages. Since the tax rates are anticipated to be lower next year, you would benefit from additional contributions to your retirement plans this year if you expect to make about the same amount in 2017 as 2016.
Owners of small businesses who file a Schedule C have a wide array of deductions, including buying equipment, supplies, and paying for other deductible expenses. There are limits, so you can’t buy two years’ worth of supplies, but in general you can prepay up to one year of certain expenses, like insurance, and deduct the entire amount, especially if you are on the cash basis.
Harvest your losses in your taxable investment accounts. Next year, the anticipated capital gains rate is either the same or lower than 2016, and you can deduct up to $3,000 per year of capital losses, net of capital gains. While you are at it, beware of buying a mutual fund in a taxable account that has a capital gain built in. You can be buying a tax liability.
Roth IRA conversions can still make sense based on your 2017 projected brackets. Converting to a Roth before the end of 2016 will create taxable income, but you have until 10/15/2017 to ‘recharacterize’ the conversion, or take a Mulligan and reverse the Roth conversion.
Rental expenses are deductible above the line, but beware of the passive income limitations if they put you in a loss. Making repairs or paying expenses, including property taxes or insurance can make sense if you have net income from rentals. If you have a pass-through entity, like an LLC or S-corporation, it may make sense to accelerate business expenses and defer income.
Cash-basis farmers have an opportunity to shift income to a potentially lower tax rate by accelerating expenses into 2016 and deferring income to 2017. Conservation expenses, equipment purchases, fertilizers, fuel, insurance, seeds and plants, supplies, veterinary bills and taxes can all be considered.
Educator expenses up to $250 are deductible. If you are a teacher, paraprofessional or other qualified educator be sure to use this.
Health Savings Accounts (HSAs) can be a Heckofa Savings Account. You deduct funds paid into a HSA and can take withdrawals at any time (even in later years) tax-free for qualified medical expenses.
SEP, SIMPLE and Qualified Plans include self-employed 401(k) plans. If you have self-employment income you can deduct a significant amount from your income (depending on your income and age, up to $53,000 or $59,000). To set up a self-employed 401(k), you must establish the plan by 12/31/16. You have until the extended due date of your 2016 return to actually fund your retirement account but you can deduct the contribution from your 2016 income.
If you have net income from self-employment (from a Schedule C or from a pass-through entity), you may be able to deduct health insurance premiums (including Medicare premiums) paid for you, your spouse, dependents and under-age-27 children.
Student Loan interest deductions may go away, since the new proposal only talks about deducting mortgage interest. Make sure to utilize this deduction if you have student loans.
The deduction for qualified tuition and fees may go away under new laws. Deducting the tuition in 2016 is a benefit.