Tax Planning for 2015

3 November 2015

Don’t wait until the beginning of next year to plan for your 2015 taxes – start now, while we can help you come up with tax-saving strategies. With no substantial Congressional action taken this year, the top federal tax rate remains at 43.8% for the highest income earners and 23.8% for qualified dividends and long-term capital gains. The time to make sure your assets are protected with a comprehensive tax planning strategy is now! We tailor your tax plan to your individual situation and specific needs.

Are you aware of the consequences of not planning effectively? They can be significant. For example, if you’re over 70½ years old and fail to withdraw your required minimum distribution (RMD) from your retirement account, the IRS will levy a penalty of 50% on the amount you didn’t withdraw! Don’t let this happen to you and your family – plan now!

Here are seven steps you can take now to help reduce your income tax liability for 2015 and ensure your hard-earned assets – and your family’s security – are protected.

1. Start planning. Now.

Don’t delay! Remember, proper planning prevents poor performance. Don’t wait until April to look at your tax situation. Contact us today and let us help you make strategic decisions to reduce your tax liabilities and protect your assets. Don’t wait for New Year’s Eve to call us to ask if you can make a major purchase for your business and still get a deduction – by that time, it may be too late.

2. Take advantage of all retirement plans available to you.

Consider making the maximum contribution possible to all qualified retirement plans available to you. Since no two tax situations are identical, call us to help you determine your best move. We will look carefully at all your options before determining whether this is right for you, your family, and your tax situation.

Your qualified retirement plan contributions lower your taxable income now, while the tax-deferred earnings in the plan appreciate. Participants in 401(k), 403(b), and most 457 plans can contribute up to $18,000 for 2015, plus an additional $6,000 if they’re over 50 years of age. Don’t miss out on your employer’s matching contribution—it would be like turning away “free money.” If you’re self-employed, you can contribute up to $53,000 to a SEP-IRA (depending upon your income) or $5,500 to a regular IRA, with a $1,000 catch-up if you are over the age of 50.

3. Make sure you’re taking all required minimum distributions from your retirement plans.

It bears repeating—the consequences of failing to take RMDs can be significant. The IRS notes: “If an account owner fails to withdraw a RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%.” For high-net-worth clients, with significant retirement assets, this tax could amount to hundreds of thousands of dollars. This penalty is entirely avoidable! Make sure you know about all your retirement accounts and their current balances to ensure you are withdrawing all your RMDs. If you have any questions on this, remember that we are retirement planning specialists, and will be delighted to help you navigate through this complex maze.

4. Consider converting your existing IRA to a Roth IRA.

For 2015, there are no income limitations for converting your IRA to a Roth IRA. This tactic isn’t for everyone (again, no two situations are identical), but it may be worth exploring for you. When you convert an IRA to a Roth, you pay taxes at the time of conversion, rather than when you withdraw the money. Your money continues to grow, tax-free, until you decide to withdraw it, and unlike a traditional IRA, you can keep contributing to your Roth IRA for as long as you have earned income, and there are no RMDs during your lifetime. Thanks to the power of compounded earnings, you or your heirs could end up with a significant tax-free asset.

5. If you retire, consider converting your 401(k) plan into an IRA.

An IRA may give you more flexibility than your employer’s 401(k), allowing you to exercise more control over your funds without being subject to the 401(k) plan’s rules and regulations. For example, if you’re married and participate in a 401(k), you must name your spouse as the primary beneficiary. With an IRA, you can name anyone.

Similarly, in a company-sponsored plan, you can only invest your funds in the investment options available in your plan. With an IRA, on the other hand, you can invest in any stock or fund you choose.

6. Take advantage of employer-sponsored flexible spending accounts (FSAs).

You can defer up to $2,500 of your salary (or $5,000 per couple), pre-tax, into a healthcare or dependent care spending account. Not only does this reduce your taxable income, but if you think you’re going to have expenses like orthodontia, you could be missing out on thousands of dollars if you don’t sign up for your FSA.

7. Make a gift—or more than one—of up to $14,000 per person.

You can make a gift of up to $14,000 per year to any individual you choose, without affecting your estate tax exclusion, which for 2015 is $5.43 million, and, without having to file a gift tax return. Not only does this reduce the size of your estate, but it could also allows you to help someone close to you achieve financial goals like paying off student loans or making a down payment on a house. If you would like to give more than $14,000 to a given individual, please call us to help you design a gift strategy to address your specific needs.

The next step? Call us!

All of these tips represent general advice. When it comes to tax planning, one size does not fit all. Rigby Financial Group provides highly individualized, specifically tailored tax plans for individuals and businesses. Please contact us for advice and assistance in creating a specialized plan that suits your unique situation.


The information presented here is not specific to any individual’s personal circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.