End-Of-Year Tax Planning


“The plans of the diligent lead surely to abundance and advantage…” Proverbs 21:5.

As we approach the end of year 2015, it is time to make the last minute tax planning before the New Year 2016.  The 2015 year-end tax planning is quite difficult as several advantages deductions and credits provisions have expired in the last tax year 2014.


The coming presidential election may pressure Congress to extend some of the expired provisions in order to gain taxpayer favor and sway the election. However, without the Congress extension, the following provisions will not be available to taxpayers in 2015: (1) the option to elect to deduct state and local sales taxes instead of state and local income taxes, (2) the above the line deductions for tuition and educator expenses, (3) the bonus depreciations, (4) the extended limits to sec 179 depreciation, (5) qualified charitable distribution (which allows taxpayers to make tax-free transfers from IRAs directly to charitable organizations), and (6)  research & development credits.


Taking a different direction for 2015 tax planning, the following tax-saving options may still be available for you:


  • The 2015 standard deduction is $12,600 for Married-filing-jointly taxpayers and $6,300 for single filing status taxpayers. The deduction amounts will be almost the same for year 2016. Taxpayers may consider taking the standard deductions in year 2015 and move the planned year 2015 deductions to year 2016. This method would allow you to have a large itemized deduction for a single year instead.  Also, if your itemized deductions are generally not too much larger than standard deductions, you may consider moving your 2015 year-end charitable donations into early-year 2016.


  • With the lack of favored tax provisions, if you are looking to owe much higher taxes this year, consider increasing a large amount of year-end withholding for federal and state. This method would provide a large state income tax deduction and help you avoid underpayment of estimated tax penalties.


  • Now is the time to sell off the “Loser” securities in your securities portfolio, which are not likely to recover from loss to gain. Even though the capital loss deduction is capped at $3,000, this deduction could potentially save you over $1,000 tax dollars.


  • The penalties for lacking health coverage are getting higher and higher. For instance, the penalty for three or more uninsured household members in year 2015 is $975 and higher, but year 2016 penalties can be $2,085 and higher.  Depending on your household income, the penalties for lack of health insurance coverage can be quite significant. It is a good idea to consider your health insurance coverage now for year 2016.

Again, these are some of the tax-saving options for you to consider.  If you are looking to dig deeper into your situation or would like to know more tax-saving strategies, please feel free to contact us.

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Daniel Lu

Daniel Lu - Certified Public Accountant

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