Year End Tax Planning


From the desk of: Robin L. Wdowiak, EA

The colors of fall are fading fast and it’s nearing the end of the year already.  Where did the time go?  The holidays are fast approaching and then, a new year right behind it.  You may not be thinking about taxes with all you have going on but now is the right time to do just that.

When tax planning, it is important to consider both the current year as well as the next year.  Income can be accelerated into 2015, if projected income for 2016 is going to be significantly higher. Income can also be deferred to 2016, if income in the coming year is going to be significantly lower.

Options for accelerating income include harvesting current year gains, converting retirement accounts, taking IRA distributions or settling taxable insurance claims in the current year.

Options for deferring income include taking year-end bonuses in January, if selling assets at a gain waiting to do it in 2016 or transitioning investments into deferred annuities.

Options also exist for accelerating or deferring deductions.  Things to consider here would be when to pay for that spring college tuition or contribute to your favorite charity.  Is it a good time to clean out those closets now or should you wait until spring to donate?  You may want to consider selling stocks at a loss to off-set taxable income in the current year if your income will be high.

Other considerations to lower income tax in the current year would be to maximize your deferred retirement accounts by the end of the year.  You can put up to $18,000 (or $24,000 if you are 50 or older) into a 401(k), 403(B) and most 457 plans.  The maximum contribution into a Traditional IRA is $5,500 ($6,500 if age 50 or older).  You may contribute to an IRA right up to the due date of the tax return.  These monies will not be taxable until distributed. 

If you own rental property consider accelerating or defer paying expenses as a tool to decrease or increase income in the current year. 

Self-employed individuals should also consider accelerating or defer paying expenses but also whether to purchase equipment in 2015 or wait until 2016 to take advantage of increased deductions.

Important life events in the year will also affect your year-end tax planning strategy; divorce, marriage, the birth of a new child or the death of a spouse can all affect your tax filing.

Gift giving should take place before the end of the year to take advantage of the annual limit of $14,000 per recipient for estate planning purposes.

If you think you may benefit from these types of tax planning you should consider make an appointment with your tax consultant before the end of the year!

Robin L. Wdowiak is the President of AJE Financial Services located in Ludlow.  Ms. Wdowiak is an Enrolled Agent specializing in the field of taxation and enrolled to represent clients before the Internal Revenue Service as wel

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