2015 Year-End Tax Planning

Written by: Martin X. Shields

Although it is better to be more strategic with your tax planning and start at the beginning of the year, there is still time to implement strategies to lower your tax liability for 2015. We have highlighted a few of them below.

•If you have children or grandchildren, who are either in college or may attend college at some point, you can contribute to a New York State (NYS) 529 plan and receive up to a $10,000 deduction per couple against your NYS income tax for the amount that you contributed. These funds can grow tax-free as long as the distributions are used for qualified educational expenses.

 

• If you have charitable interests, you can contribute highly appreciated stock to a charity you support. You can then take a deduction for the contribution and avoid paying capital gains tax on the appreciated position.

 

• If you have any stock positions in a taxable brokerage account that have large losses you can sell those positions and realize the loss. This loss can be used as a deduction against any realized capital gains and annually, $3,000 of this loss can be used as a deduction against ordinary income. If you elect this strategy, it is important that you don’t run afoul of the wash sale rule which states that the loss on sale of a security is disallowed for federal income tax purposes if, you buy a substantially identical security either 30 days before or 30 days after the sale of the security.

 

• Beginning in 2006, Congress approved Qualified Charitable Contribution (QCD), allowing IRA owners to directly transfer up to $100,000 from their IRA to a charity, tax-free, as part (or all) of their Required Minimum Distribution (RMD) for the year. A QCD is not taxed to the account holder as income, meaning less tax for the account owner but the account owner doesn’t receive a deduction for this charitable donation. Currently, this distribution has not been approved by Congress for 2015 but in past years they have approved it at the very end of the year. If this strategy sounds interesting to you, it might be beneficial to wait on taking your RMD closer to the end of the year.

 

• If you are not subject to the Alternative Minimum Tax (AMT), you may want to pay local property tax and any estimated state income taxes this year in order to increase your 2015 deductions.

 

• If you have an inherited IRA or are over 70 ½ and have an IRA, make sure you take your RMD before the end of the year, otherwise you will incur a penalty equal to 50% of the amount you failed to distribute.