Start 2016 Tax Planning before the New Year's ball drops

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Dec 19, 2016, 12:43 ET

NEW YORK, Dec. 19, 2016 /PRNewswire/ -- Despite the increased prospect of tax reform under the President-elect, the tax policies and regulations for 2016 have been in place all year. That means now is the best time for taxpayers to finish reviewing their 2016 tax situation. By following a few simple steps before the New Year's ball drops, taxpayers save money and ease the stress of tax filing.

"People often make holiday shopping less stressful with early planning and preparation, which is exactly what taxpayers need to do in order to have a stress-free tax season," said Greg Rosica, contributing author to the EY Tax Guide 2017. "Though tax reform isn't here yet, the proposals suggest that 2016 could be the most important year to take advantage of current tax credits and deductions. Last year's return could remind you of the deductions, credits and savings you're entitled to now, so make that mandatory reading and make some adjustments before missed opportunities become part of your New Year's resolution list for next year."

Five year-end tips taxpayers should consider:

1) Review your stock options: Don't overlook your options or option shares when you do your year-end tax planning. There may be opportunities to avoid or minimize regular income tax or alternative minimum tax (AMT) by taking action this year.

2) Fully fund your workplace 401(k) account: For 2016, your 401(k) plan may allow you to save up to $18,000 of your salary ($24,000 if you will be at least 50 by year-end) on a pretax basis.

3) Make year-end charitable gifts: With the tax proposals from the incoming administration that could cap deductions and lower rates, high net worth individuals could find the benefits of certain tax deductions will be higher this year than they'll ever be again.

4) Use your capital losses: If you had capital gains this year, consider offsetting those gains by selling property in which you have unrealized capital losses.

5) Adjust tax withholdings: By increasing your withholdings near the end of the current year, you can avoid penalties that would otherwise have been imposed due to an underpayment of taxes earlier in the year.

The EY Tax Guide 2017 contains these tips and more that taxpayers should focus on before ringing in the New Year. Visit www.ey.com/EYTaxGuide for more tips, suggestions and email alerts for information on up-to-the-minute tax law changes as they happen.

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This news release has been issued by Ernst & Young LLP, member firm of EY serving clients in the US.

SOURCE EY