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Plan for the Year Ahead…and Beyond

Credits: CWM

As 2015 draws to a close, a turbulent economic and legislative environment means CWM is keeping a close eye on several major planning issues to properly guide our clients:

Checking on Congress

The most important thing to do this year for tax planning is to keep an eye on Congress to see whether lawmakers manage to extend popular tax provisions before the end of 2015.  Some notable provisions must be extended in order to allow:

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  • Taxpayers aged 70½ and over to make tax-free charitable contributions from IRA’s. This is also known as a Qualified Charitable Deduction (QCD);
  • Businesses to deduct up to half of eligible equipment placed in service this year;
  • Taxpayers in states without income tax – like Washington, Texas and Florida – to deduct state sales tax.

Historically, lawmakers have extended popular provisions at the last minute which makes planning difficult and challenging. In fact, it was not until December 19, 2014 that Congress extended the QCD (qualified charitable deduction) last year, which then expired two weeks later. There have been proposals in Congress to make the QCD provision permanent. That may or may not happen.

Take a Closer Look at Your State Residency Status

For individuals who split their time in two different states throughout the year, now is an excellent time to consider where you may be taxed as a resident for 2015. To make it more likely that the high-tax jurisdiction will respect the move and not continue to tax you as a resident, you should track the number of days spent in each jurisdiction. Generally, residing in a state for 183 days or more, that state will assert residency and the ability to tax all of your income. Furthermore, if you move to a new state but you maintain significant contacts with the old state (including driver’s license, residences, bank accounts and the like); you could run the risk of being taxed as a resident in the old state.

Manage Capital Gains and Losses

Capital gains and losses present excellent opportunities for deferral because you have nearly complete control over when you sell them, but be careful when harvesting losses. You generally cannot use capital losses against other kinds of income, and if you buy the same security within 30 days before or after you sell it, you cannot use the loss under the wash sale rules.

Bunch Itemized Deductions 

Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductible expenses into one year can help exceed these AGI floors. Consider scheduling costly non-urgent medical procedures in a single year to exceed the 10 percent AGI floor for medical expenses (7.5 percent for taxpayers age 65 and older). This may mean moving a procedure into this year or postponing it until next year. To exceed the 2 percent AGI floor for miscellaneous expenses, bunch professional fees like legal advice, wealth management fees and tax preparation fees, as well as unreimbursed business expenses such as travel and vehicle costs.

Get Charitable House in Order

If you plan on giving to charity before the end of the year, remember that a cash contribution must be documented in order to be deductible. If you claim a charitable deduction of more than $500 in donated property, you must attach Form 8283. If claiming a deduction of $250 or more for a car donation, you will need a written acknowledgement from the charity that includes a description of the car.  As mentioned in previous commentaries, a Donor Advised Fund (DAF) is a fantastic strategy for gifting appreciated securities.

Make Up a Tax Shortfall with Increased Withholding

Certain kinds of taxes are due throughout the year. Check withholding and estimated tax payments now while you have time to fix a problem. If you’re in danger of an underpayment penalty, try to make up the shortfall by increasing withholding on your salary or bonuses. A bigger estimated tax payment can leave you exposed to penalties for previous quarters, while withholding is considered to have been paid ratably throughout the year.

Several planning topics have been front and center this past year and for subsequent years:  1) Converting IRA to Roth, 2) IRA owners over age 70½ taking advantage of QCD and 3) Exercising Stock Options. Every tax payer’s situation is different which would determine whether these planning strategies make sense. We highly recommend you strategize with your accountant and/or CWM. Remember, wealth is not what you make, it is what you save!

On behalf of everyone at Chatham Wealth Management, we wish you and your family a happy holiday season and a safe and prosperous New Year!  

For more information please visit us on the web at, call us (800) 472-8086, or send us an email at We offer free portfolio reviews.

Please contact us to make an appointment. You can also view our videos at and

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