Year-End Tax Savings

Although the year-end is drawing near, there is still time to do year-end tax planning to accumulate tax savings.  Because some tax breaks expired in 2013 that Congress has not revived, year-end tax planning could be even more complicated and frustrating.  This year, taxpayers will have to deal with tax law changes that include higher marginal income tax rates, higher capital gain tax rates, restoration of the phase out of itemized deductions and exemptions, the new 3.8 percent Medicare tax on unearned income, and the new 0.9 percent tax on earned income. 

Firstly, it is significant to understand the customary year-end planning techniques that can cut income taxes.  It begins with a tax projection as to whether you will be in a higher or lower tax bracket next year.  Once this number is configured, there are two basic considerations: Should income be accelerated or deferred, and should deductions and credits be accelerated or deferred? 

For taxpayers who believe they will be in a higher tax bracket next year they should consider employing specific strategies to accelerate income and defer deductions.  Taxpayers in a lower bracket should take the opposite approach.  Below are just a few strategies for taxpayers who think they will be in a higher tax bracket.

• Receive bonuses before January 1 of the following year.
• Accelerate billing and collections.
• Redeem U.S. Savings Bonds, Certificates of Deposit or Annuities.
• Bunch itemized deductions into the year in which they can exceed the applicable threshold. 
• Postpone paying certain tax-deductible bills until next year.

See Steven J. Fromm, 2014 Year End Tax Planning Tips: Instantly Discover What You Can Do Now to Start Saving Taxes Before Year End With Proven Tax Attorney Strategies, Philadelphia Estate and Tax Attorney Blog, Nov. 29, 2014.

Special thanks to Steven J. Fromm for bringing this article to my attention.