As we reach the last quarter of the year, it is a great time to evaluate your 2015 tax situation. We believe that the best tax planning decisions are arrived at through pro-active and forward-looking analysis. The complexity of the tax laws require careful consideration of how decisions that are made today will impact not only the current tax year but also subsequent tax years. This approach allows us to be confident that we are taking advantage of available opportunities while also avoiding unexpected surprises.
Following are some time-sensitive questions to consider at year-end:
- Have I paid in a sufficient amount of income taxes via income tax withholding or quarterly estimated tax payments to avoid penalties or a large unexpected balance owed?
- Should I prepay my state income taxes prior to December 31, 2015 in order to get a federal tax deduction on my 2015 tax return or should I delay payment until 2016?
- Should I accelerate the receipt of taxable income into tax year 2015 (i.e. realizing capital gains, exercising stock options, completing a Roth conversion, receiving a discretionary distribution from a retirement plan, etc.) or delay the receipt into tax year 2016?
- Am I taking full advantage of any tax favored employee benefit plans offered through my employer?
DEDUCTIONS & PLANNING OPPORTUNITIES:
- Would I receive a greater tax benefit by accelerating tax deductions (i.e. charitable contributions, real estate taxes, medical expenses, etc.) into tax year 2015 or by delaying into tax year 2016?
- Would it be beneficial in the long-run to consider a Roth conversion for tax year 2015?
- Could I structure my charitable giving in a way to achieve a greater tax benefit such as through the utilization of appreciated securities, donor advised funds, and/or Qualified Charitable Distributions?
- Could I pay for college tuition expenses in a way that would qualify for the tax incentives available such as the American Opportunity Tax Credit?
- Have I or should I utilize my available annual exclusion for gifts to family members?
- Which account (i.e. tax-deferred, Roth, taxable) should I take distributions from to meet my cash flow needs?
- Will I have greater cash flow needs in 2016 versus 2015 that should be considered now to determine the most tax efficient timing?
- Has there been a material change in my taxable income or deductions in 2015 as compared to 2014 or will there be a material change in taxable income or deductions in 2016?
Our team at Carlson Capital Management integrates tax planning issues into the agendas of regular progress meetings. However, we welcome inquiry and communication at any point during the year as questions arise or as you become aware of changes in your situation. Feel free to set up a meeting or phone conversation with one of our tax team members at any time.