Published December 2015


Okay, maybe that seems simplistic.  It was meant as a hook to get you to read the rest of this post.  Because at this time of the year, I am seeing Facebook posts, e-mails, etc., all mentioning how if we don’t plan before the end of the month, we are going to pay more in taxes.  But that is not necessarily true.

If your tax situation is something that you cannot control, meaning you have just wages, some investment income, and normal itemized deductions … there really is not very much, if anything, you can do to change your tax situation before the end of the year.

One thing you could do, if necessary, is increase your withholding if you are in a potential underpayment penalty situation.  Don’t know what that is or if you are?  Ask me.

But let’s say you have the potential for a large capital gain, or to make a large charitable contribution.  Do you make it this year, or next year?  There are 2 things to consider.

Currently, other than inflation adjusted bracket differences, there are no major tax rate/law changes scheduled.  So other than perhaps just minor tax differences, the only thing that is truly being saved is the time value of the money.  And with interest rates so very low, is it really worth worrying about?

I have advised clients that had substantial capital gains to report them all in one year to save taxes.  It saved one client over $50k.  Accelerating a charitable deduction saved another client $15k.  And in both cases, those were PERMANENT tax savings and not just timing differences because of rate/bracket changes for each.

So, yes, if you are looking at potential capital gains, there may be tax reasons to plan now.  But also don’t forego the income now if there is a potential the gains may not be as high next month (if only our crystal balls worked properly all the time). 

Never, NEVER, make a decision just because of taxes.  Do things because they make good economic sense.

And if you want some help in making those decisions, please contact me.