lower S Corp tax rates under Trump? (AKA how to defer taxes to 2017?)

[chelasmith]

One of the few concrete policy ideas Trump proposed during the campaign was lowering corporate taxes to 15% and, notably, allowing partnerships and S-Corps to pay at that 15% rate.

Who knows if it'll wind up passing like that, but it might!

I started an S-Corp earlier this year that earns high-six-figure profits. Already maxing out tIRA, SEP-IRA, and HSA and taking regular deductions like home office, etc.

Since I'm looking at a sizable tax bill for 2016, but the rates might go down significantly for 2017, wanted to see if anyone knew of possible ways to defer taxes for a year or two. (For example, is deferred compensation plausible? Difficult?)

Thanks y'all :-)

[SeattleCPA]

I love S corporations. And I watch S corp tax law proposals carefully. (I used to teach a graduate tax class in S corp tax law to CPAs and attorneys)...

But I don't think you can act on proposals from any elected official. You (we all) need to wait until real details emerge.

P.S. Smoothing your income is one usually sure way to minimize your taxes. E.g., better to make $50K consistently than to fluctuate between $0 and $100K. Same logic applies if you're talking about higher income amounts. The spikes up get taxed way heavier than the spikes down get, err, untaxed...

[chelasmith]

P.S. Smoothing your income is one usually sure way to minimize your taxes. E.g., better to make $50K consistently than to fluctuate between $0 and $100K. Same logic applies if you're talking about higher income amounts. The spikes up get taxed way heavier than the spikes down get, err, untaxed...

My apologies if this is an amateur question, but are there easy techniques to smooth one's income? Or is it something best left to a professional accountant?

[SeattleCPA]

First of all, great question. :-)

Second, this isn't something you need an accountant for... or at least I don't think.

Most people and small businesses are cash basis taxpayers so as long as you're not totally manipulative or distorting your income or deductions, you should have quite a bit of flexibility for "smoothing." Three examples:
1. You can buy a new computer (or other depreciable asset) in a bigger income year and then expense the asset all at once. You can also delay these sorts of purchases so they don't occur in lower income years...
2. You can probably arrange with customers or clients to move payments into and out of the year for non-manipulative or un-distorting reasons.
3. You can make bigger pension plan contributions in a bigger income income.

I wouldn't go crazy about this sort of stuff. But a little bit of smoothing is easy and usually helps if your income is moving up and down, up and down.

[MustacheAndaHalf]

But I don't think you can act on proposals from any elected official. You (we all) need to wait until real details emerge.

On the plus side, it was a core campaign promise: Trump said he would bring back jobs by lowering the corporate tax rate.  There's also Republican majorities in both halves of Congress backing him up.  When Reagan was in this situation in 1981, he passed tax cuts.  Same for George W Bush in 2001.
On the less likely side, Democrats retain a procedure that can stop a bill from being voted on.

Overall I find a very strong chance of a significant drop in corporate tax rates in Trump's first year in office.  While technically you are right to suggest waiting (it could be a 20% tax rate for example), I just want to emphasize this tax plan has a much stronger chance of being enacted than a typical promise by an elected official.