Year End Tax Planning: Review These Tips Before Closing Your Books

We invited our Chamber member accountants to share ideas and thoughts that might help businesses and individuals with their year-end tax planning.

Hunter’s guide to year-end tax planning

Larry Feld of the Hunter Group in Fair Lawn kindly forwarded us a copy of their 2015 Year End Tax Planning Guide which is replete with information on both the question marks and the complexities that haunt.

Rather than attempt to relate those complexities in piecemeal fashion, we instead refer you their website,, where you can freely access it.

MBAF advises on expiring tax breaks

Steven Blumenthal, an old friend with MBAF CPAs LLC, a strong and well recognized national firm, submitted a small piece focused on certain primary and formative considerations. He pointed to a laundry list of certain longstanding tax breaks that expired at the end of last year, December 31, 2014—both personal and business—that the Senate has voted to extend but that the House, dormant as it is these days, has yet to act upon. So confusion reigns supreme. He wrote:

“There are a number of tax breaks that expired at the end of 2014 and although some of them have been considered at the committee level in Congress, to date they have not been extended. For individuals these include the availability of state and local sales and use tax deductions in lieu of state and local income taxes; deductions for qualified higher education expenses against adjusted gross income; and tax free IRA distributions for charitable purposes by individuals at least 70-1/2.

For businesses, tax benefits that expired at the end of last year and that have not been extended include 50 percent bonus first year depreciation for machinery, equipment and software; the $500,000 annual expensing allowance  for certain fixed assets (currently limited to $25,000 in 2015) with phase outs above $2 million in 2014 and $200,000 in 2015; the research tax credit; and the 15-year write off for qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.

These items need to be monitored for availability before year end to see if Congress retroactively reinstates them to the taxpayer benefit.”

This puts everyone in a state of suspended animation, because nobody knows.

Visit their site,, and look under press where you will be able to access their extremely helpful bi-monthly newsletter, Stay a Step Ahead. It is full of helpful tax planning hints.

Keller & Lebovic talks gifting, charitable donations & filing early

Alyssa Lebovic, partner at Keller & Lebovic CPAs in Fair Lawn, is this year’s home run hitter, as she submitted a substantive and interesting original piece that we submit directly to our readers. It has been appropriately consolidated as needed, but the words and the thoughts all remain Alyssa’s and we thank her for them:

“Year-end is a great time for giving, not just to be generous, but also as a tax planning tool. The IRS allows any person to gift to another person (related or not) $14,000 per year, without filing a gift tax return or having to pay a gift tax. The recipient always receives the gift free and clear—no taxes to them. It’s the donor who would have had the tax consequences.

Interestingly, when the IRS says ‘per year’ they are saying that a grandparent could gift a grandchild up to $14,000 in December 2015, and then again up to another $14,000 in January 2016.

A little known fact is that medical and educational expenses paid directly to the medical provider or to the school or college do not count in this $14,000 per year. It must, however, be paid directly.

Gifting can be a useful tool in shifting income from one generation to another. If you gift appreciated stock to a family member in a lower bracket, when they eventually sell the stock, it will be taxed at the recipient’s lower bracket instead of the donor’s higher bracket.

Appreciated stock is also useful when making charitable donations. Say you wanted to give your favorite charity $10,000 before year end. If you sold appreciated stock that perhaps you bought long ago for $2,000, but was now worth $10,000, to make that donation, you’d have an $8,000 gain on which you’d likely pay 15 percent capital gain tax for a tax of $1,200. If you gave that same stock directly to the charity and let the charity sell the stock, you’d still get a charitable deduction for $10,000, but neither you nor the charity would have to pay tax on that capital gain. A win-win.

Being generous with charities at year end or making generous gifts to family members are both means of reducing one’s estate, where here in New Jersey we have one of the highest state estate taxes in the nation. That’s predominantly caused by having a low threshold for having a taxable estate. Here in New Jersey, an estate will have to pay a tax of almost $20,000 if the value of the estate is over $675,000, and it goes up from there.

Here in Northern New Jersey, with higher housing prices, that is not hard to hit. So despite the high threshold for a taxable federal estate, for New Jersey purposes, estate planning is still alive and well.

Another important difference here in New Jersey between federal and New Jersey taxes is that while, for federal purposes, you can carry unused losses from one year to another, in New Jersey you cannot do this. Take a look at your portfolio before year end. If you have some losses with this year’s crazy ups and downs in the market, try to offset them by selling other stocks at a gain before year end. The earlier losses will shield the gains from having to pay tax for both federal and state purposes.

On the subject of capital gains and shifting the tax burden to family members in lower brackets, be aware of the following:

If you’re below the 25 percent bracket—with taxable income after all deductions at $74,900 joint ($37,450 married filing separately or single) and $50,200 for head of household—long term cap gains are still taxed at 0 percent. Yes, 0 percent for people in these brackets so long as the gains do not cause you to exceed this amount of taxable income.

Utilizing this 0 percent cap gain bracket, can also be used to gift appreciated stock that you have held more than a year to family members in these low brackets to sell in their names and pay no tax on the appreciation.

This would be especially wise when you are helping to support parents or post-college children who are underemployed or unemployed. Say you are helping Mom pay for expenses by giving her $1,000/month. Rather than taking that from your savings, transfer $12,000 of appreciated stock to her, then immediately sell it and use it to cover the next 12 months of expenses. There would have been a 15 percent cap gain tax on this if sold in your name (or more depending on your tax bracket), but 0 percent tax if sold in her name before year end. The family unit can hold on to more money that way.

For business owners, consider making pension contributions for yourselves and your staff. Check the rules because you may not be able to contribute for yourself without making certain contributions for the staff depending on the type of plan you have and the employee’s length of service.

Accountants generally base your quarterly estimated tax payments on the prior year’s income. If your 2015 income was substantially up or down from 2014, you might want to have your accountant do a year-end tax projection. If income is down, you can effectively get your refund by eliminating or significantly reducing your 4th quarter estimate now instead of waiting until April for a big refund.

Lastly, my advice to all, as always, is to file early. If you are due a refund, you’d like it sooner rather than later. If you owe money, the sooner you calculate that, the easier it is to start putting it aside to pay in April. Just because you calculate it and even file early, doesn’t mean you have to pay it any sooner, you still have until April 15 to pay it. If you’re due a refund from federal and owe New Jersey or vice versa, filing early may get you a refund from one early enough to pay the other.

Taxes don’t have to be a burden, they can be a planning opportunity. If you’re not doing this kind of planning with your accountant, you may have outgrown them.”

Thank you, Alyssa. Visit her at Keller & Lebovic at

By Rich Fritzky, retired President & CEO of the Meadowlands Regional Chamber and founding editor of Meadowlands USA.

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