Year-End Tax Planning Strategies For Individuals

With year-end quickly approaching and tax season just around the corner, we thought it’s a good opportunity to brush up on a few basic tax-planning strategies.

For any taxpayer, an important strategy is deduction planning. Deduction planning is extremely complex, but some things to remember if you are a cash basis tax payer are:

• Expenses are only deductible in the year they are paid
• Date checks before year end and mail them before January 1, 2016
• Medical Expenses are deductible only to the extent that they exceed 10% of AGI or 7.5% of AGI for taxpayers over 65.
• Consider making charitable contributions at year end to give yourself use of money during the year while also being able to claim a deduction.
• Child Tax Credit continues to be a credit of $1,000 per qualifying child under age 17
• Student Loan Interest has a maximum deduction of $2,500 above the line.

Outside of deduction planning, the following numbers are great reminders that should be a helpful reminder to any taxpayer:

• Tax brackets have not changed for 2015 and remain at 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%
• Gift giving: Annual gift tax exclusion allows a taxpayer to give $14,000 to each donee tax free. Married givers may gift $28,000 tax free to each donee.
• IRA/Retirement Savings Rules: The annual deductible contribution limit for an IRA is $5,500, but for 2015, a $1,000 catch up contribution is allowed if taxpayer is over 50 years old.
• Short term capital gains and non-qualifying dividends will continue to be taxed at the taxpayers ordinary tax rates while long term capital gains and qualified dividends will be subject to a maximum rate of 20%.(0% if an individual is in the 10% or 15% marginal brackets, or 15% for individuals in the 25%-35% brackets, and 20% if the individual is in the 39.6% bracket)

As always, tax planning is complex and the information above only scratches the surface. For more detail and help in other specific areas, please refer to our Individual Tax Strategy Guide, or give us a call at 616-393-0398.