Now that the final quarter of the year has begun, it is time to focus on year-end tax planning to minimize taxes for this year and get ready for the coming year. Despite rhetoric about tax reform from Congress and presidential contenders, tax rules for planning now are essentially the same as they were last year. Nonetheless, there are many tax planning opportunities that can be implemented now that will make a favorable impact on 2015 income tax returns.
Overview
As a general rule, year-end planning is a multi-year exercise, taking into account current tax rules, rules for next year, and the taxpayer’s income and expenses now and anticipated for the future. Due to virtually no increase in the Consumer Price Index (CPI), projections for cost-of-living adjustments (COLAs) to dozens of tax rules for 2016 are modest or nonexistent; official adjustments will be released later this year. For example, the personal exemption likely will rise only $50. Similarly small increases are projected for tax brackets, some standard deduction amounts, the alternative minimum tax exemption, and income thresholds for Roth IRA contributions.
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