Re: 2014 Year-End Tax Planning - Individuals
The 2015 tax filing season is less than a month away. It is NOT too late for individuals who want to explore minimizing their tax burden and maximizing their tax savings to get started now on 2014 year end planning. By taking certain steps now, before 2014 draws to a close, you may be able to reduce the size of your tax bill. This communication explores some of the traditional year-end planning techniques and how events in 2015 may impact year-end planning, including the Affordable Care Act, which impacts almost everyone in one way or another. Please feel free to contact our office if you have any questions about 2014 year-end tax planning and/or check our Website at www.RonaldKJonesCPA.com for additional planning articles and memos.
Applying Some Traditional Techniques
One year ago, prospects for comprehensive tax reform were looking up in Congress. Two senior lawmakers, Senator Max Baucus, Democrat from Montana, and Representative Dave Camp, Republican from Michigan, had worked together to develop a tax reform package. In early 2014, Camp introduced a sweeping tax reform bill, the Tax Reform Act of 2014. If it had passed, Camp's bill would have turned traditional year-end planning upside down. However, momentum for tax reform quickly faded. Baucus retired from Congress to become U.S. ambassador to China. Camp also announced his plans to retire after 2014. Several proposals in Camp's bill have moved separately in the House, but NOT yet in the Senate. Any action on the overall bill is extremely unlikely before year-end.
What does this mean for tax planning?
It means that the current Tax Code, with all its complexities, will be around for 2015 and likely for 2016. The current Federal individual income tax rate structure (10, 15, 25, 28, 33, 35 and 39.6 percent) will be in place for 2014 and 2015. The same is true for the current tax treatment of capital gains and dividends. The limitations on itemized deductions and the personal exemption phase-out are also expected to remain unchanged for 2015. The alternative minimum tax (AMT) is "patched" thanks to the American Taxpayer Relief Act of 2012 (ATRA), providing enhanced exemptions amounts and allowing the use of nonrefundable personal credits against regular tax and AMT liability. All these developments provide some certainty in tax planning for year-end 2014.