Financial Focus: Year End Planning

Reprinted from PN/Paraplegia News November 2015

It's the perfect time to do some planning for your 2015 taxes

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The holiday season is upon us and while we’re all looking forward to parties and time with family and friends, don’t forget it’s the perfect time to do some planning for your 2015 taxes. Tax planners often start by making checklists to guide taxpayers toward year-end strategies that might help reduce taxes. These are a few good places to start.

Filing Status & Exemptions

  • If you’re married, compare the tax liability for yourself and your spouse based on all filing statuses.
  • Determine whether you’re entitled to claim a dependency exemption for a parent or other relative.
  • If you’re claiming a dependency exemption for a child who is 19 or older (age 24 or older if a full-time student), make sure the child’s gross income doesn’t exceed $4,000.

Family Tax Planning

  • Determine whether you can shift income to family members who are in lower tax brackets in order to minimize overall taxes.
  • Consider making gifts up to $14,000 per person under the annual gift tax exclusion.
  • Take advantage of tax credits for higher education costs if you’re eligible to do so. These credits are based on the tax year rather than the academic year.

Employee Matters

  • Self-employed individuals (who generally use the cash method of accounting) can defer income by delaying the billing of clients until next year.
  • Use installment sale agreements to spread out any potential capital gains among future taxable periods.
  • Employees can deduct their business expenses as long as these expenses exceed 2% of annual adjusted gross income (AGI).

Business Income 
& Expenses

  • Accelerate expenses in the current year to lower your tax bill.
  • Increase your employer’s withholding of state and federal taxes to help you avoid exposure to estimated tax underpayment penalties.
  • Pay last-quarter taxes before Dec. 31 rather than waiting until Jan. 15.
    n Make sure you meet the required threshold percentages of your AGI to deduct expenses by “bunching” miscellaneous expenses into the same year.
  • If you have significant business losses this year, it may be possible to apply them to the prior year’s returns to receive a net operating loss carryback refund.
  • In certain circumstances, it may be possible for the full cost of last-minute purchases of equipment to be deducted currently by taking advantage of Section 179 deductions.
  • Generally, you’re able to make a contribution to your retirement plan at any time up to the due date (plus extensions) for filing a given year’s tax return.

Financial Investments

  • Pay attention to the changes in the capital gains tax rates for individuals and try to sell only assets held for more than 12 months.
  • Consider selling stock if you have capital losses this year that you need to offset with capital gain income.
  • If you plan to sell some of your investments this year, consider selling the investments that produce the smallest gain.

Personal Residence & Other Real Estate

  • Make your early January mortgage payment (due no later than Jan. 15 of next year) in December so you can deduct the accrued interest for the current year that’s paid in the current year.
  • If you want to sell your principal residence, make sure you qualify to exclude all or part of the capital gain from the sale from federal income tax. Generally, you can exclude the gain only if you used the home as your principal residence for at least two out of the five years preceding the sale.
  • Consider structuring the sale of investment property as an installment sale in order to defer gains to later years.

Retirement Contributions

  • Make the maximum deductible contribution to your individual retirement account (IRA). Try to avoid premature IRA payouts to avoid the 10% early withdrawal penalty. You may be able to contribute and deduct more if you’re at least age 50.
  • Set up a retirement plan for yourself if you are a self-employed taxpayer.
  • Set up an IRA for each of your children who have earned income.
  • Minimize the income tax on Social Security benefits by lowering your income below the applicable threshold.

Charitable Donations

  • Make a charitable donation (cash or even old clothes) before the end of the year.
  • Use appreciated stock rather than cash when contributing to charities.
  • Use a credit card to make contributions in order to ensure they can be deducted in the current year.
  • Itemized Miscellaneous & Medical Expenses
  • Take advantage of the adoption tax credit for any qualified adoption expenses you paid. In 2015, you may be able to claim up to $13,400 per eligible child (including children with special needs) as a tax credit.
  • Maximize the use of itemized miscellaneous expenses and/or medical expenses by bunching such expenses in the same year, to the extent possible, in order to meet the threshold percentage of your AGI.
  • This information was developed by Dan Jones of Raymond James, and Broadridge, an independent third party. It’s general in nature, isn’t a complete statement of all information necessary for making a financial decision and isn’t a recommendation or a solicitation for services


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