2015 Year-End Tax Planning

With the end of the year just around the corner, it is time to start thinking about year-end tax planning.  Here are a few items to keep in mind as 2015 winds down:

  • Is income down in 2015? It may be a great year to do a partial Roth IRA conversion. By converting the regular IRA into a Roth IRA, you are electing to be taxed in 2015 while you are temporarily in the lower tax bracket.  Not only will you pay tax at the lower rate, but now your investment can grow tax-free!
  • Remember to take a look at your financial portfolio before year-end. It may make sense to harvest any capital losses to help offset those capital gains.  You are limited to losses (in excess of gains) of $3,000 per year.  Any further losses are carried forward to the next tax year.
  • Don’t forget those year-end gifts! The 2015 annual gift exclusion has remained at $14,000. This means a married couple can jointly gift $28,000 to a single individual before year-end.  Assuming a married couple has three children, they would be able to move $84,000 from their taxable estate.  Gifts over the annual exclusion must be reported on a gift tax return.
  • Maximize your retirement contributions. The current maximum IRA contribution is $5,500.  Individuals over the age of 50 are allowed to contribute an additional catch-up contribution of $1,000.  The employer sponsored 401(k) maximum is $18,000 with a catch-up contribution of $6,000.  This can translate to some serious tax savings come April 15th.

Some year-end planning techniques take time to implement.  I encourage you to contact an Anders advisor now, rather than waiting until December.