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Tis’ the Season … for Year-end Tax Planning

November 11, 2015

Mary E. Hoyt, CPA

With the holidays upon us, the last thing anyone wants to think about is taxes. However, when carving your Thanksgiving turkey, think about carving out some time to do just that. Planning before year end could reap some very positive tax-saving ideas, which will be sure to increase your holiday cheer.

Some of the typical year-end tax planning strategies for individuals include:

  • Examining your investment portfolio for potential losses to realize. To avoid wash/sale rules, you cannot buy back the security for 31 days from the sale date or the loss will not be allowed.  Please note that purchases include dividend reinvestments.
  • Consider making a contribution into 529 plans if you live in a state that allows an income tax deduction for contributions.
  • Depending on an individual’s personal tax situation, it might be advantageous to either accelerate or defer income and/or deductions. Some examples of this include ideas like paying your state income tax estimates or real estate taxes prior to year end. This will usually benefit someone who is not subject to the alternative minimum tax (AMT). Another example is someone who has high medical expenses and considers taking additional withdrawals from Individual Retirement Accounts to avoid wasting deductions.
  • Consider converting traditional IRAs to Roth IRAs or making non-deductible IRA contributions.  For some, these planning options could be a sound financial strategy.
  • Charitable contributions to the correct organizations can change lives…they can also save you taxes! Contributions made by year end, even those charged on credit cards, are deductible in 2015. Regardless of whether or not you are in AMT, you will be able to deduct the monies gifted. Appreciated long-term stock is often a preferred asset to give when making larger donations. Even though the amount of the current year charitable deduction could be limited based on AGI, excess contributions do get carried over for five years. There are specific rules for required documentation to support your charitable deductions. These include, but are not limited to, cancelled checks, acknowledgement letters from charity, credit card receipts and formal appraisals for non-cash gifts over $5,000 (excluding publicly traded stock). 
  • If you are required to take a minimum distribution from your retirement account, you must do so prior to December 31, 2015. The IRS can assess penalties of 50% of the amount required to be distributed if the withdrawal is done after December 31.  Currently, a qualified distribution to charity is not allowed for 2015. This might change if Congress does an “extender” tax package similar to what it has done in the past.
  • When making gifts to individuals, the annual gift tax exclusion of $14,000 per person is available for 2015. Individuals planning on making gifts of these amounts or more should ensure that all gifts are completed (checks cleared) by December 31.

More advanced tax planning is available for the high net-worth individual taxpayer. Items for this group to consider when making decisions include:

  • Phase-out of itemized deductions
  • Impact of the 3.8% net investment tax
  • Eligibility of qualified residence interest deduction. It is important when taking out debt to acquire new property or when you refinance property that you currently own to understand the tax deductibility of future interest payments. There are debt limitation thresholds, tracing rules, timing issues, as well as deed recording requirements; all which need to be considered to successfully protect the deductibility of the interest payments.
  • Stock option portfolios should be reviewed to determine if it makes sense to exercise or not prior to year end.
  • Passive activities owned should be reviewed to determine the impact of suspended losses and, if necessary, create an action plan prior to year end that could reap tax benefits.

While no one enjoys paying taxes, looking at your tax situation early can potentially save you money or, at the very least, help you budget for your ultimate tax outcome when you file. Be sure to reach out to your tax preparer early, so that a particular plan that will work best for you can be created.

If you have any questions regarding year-end tax planning, please contact Mary Hoyt at or 203.944.8625.


Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein.  Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities.  This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.


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