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Fulton County Medical Center

10 Year-End Tax Planning Moves for Individuals

As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next. Effective tax planning can help reduce your tax bill leaving you with more money to meet other financial obligations and pursue your goals.

Consider the following before December 31st – you still have time!

  1. Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, and then buy back the same securities at least 31 days later.
  2. Postpone income until 2016 and accelerate deductions in 2015 to lower your 2015 tax bill. This strategy may enable you to claim larger deductions, credits, and other breaks for 2015 that are phased out over varying levels of adjusted gross income (AGI). Postponing income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2015. For example, this may be the case where a person’s marginal tax rate is much lower this year than it will be next year or where lower income in 2016 will result in a higher tax credit for an individual who plans to purchase health insurance on a health exchange and is eligible for a premium assistance credit.
  3. Use a credit card to pay deductible expenses before the end of the year. You get credit for the deduction in 2015 even if you don’t pay the bill until after the end of the year.
  4. If you itemize deductions, make your cash contributions to charities before December 31. If you write a check, the date you mail or deliver it will be considered the day of the gift. NOTE: You can deduct your contributions only if you made them to a qualified organization. To check whether an organization is a qualified organization, go to www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check. This online tool will enable you to search for qualified organizations. You can also call the IRS to find out if an organization is qualified.
  5. Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes. The exclusion applies to gifts of up to $14,000 made in 2015 to each of an unlimited number of individuals.
  6. Maximize your employer sponsored 401(k) or 403(b) before December 31. The limit is $18,000 ($24,000 if you’re age 50 or older).
  7. Take required minimum distributions (RMD) from your IRA or 401(k) plan if you have reached age 70 ½. Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn.
  8. Increase the amount you set aside for next year in your employer’s health flexible spending account (FSA) if you set aside too little for this year.
  9. If you can make yourself eligible to make health savings account (HSA) contributions by December 1, 2015, you can make a full year’s worth of deductible HSA contributions for 2015. The maximum deductible HSA contribution for 2015 is $3,350 for self-only coverage ($6,650 for family coverage). If you are age 55 or older and not enrolled in Medicare you may make an additional $1,000 “catch up” contribution.
  10. Make sure that distributions from education savings accounts and 529 plans are made before December 31 if you’re paying higher education expenses in the next few weeks. Distributions and payments must be made in the same year.

By necessity, these strategies are general in nature and are just some of the year-end steps that you can take to save taxes. It is recommended that you secure professional advice relevant to your specific tax situation before implementing any of these considerations.

A review of your tax picture before year-end can let you know where you stand with your 2015 taxes and suggest potential tax-saving opportunities you may have overlooked. Make sure you are doing all you can to minimize your taxes by taking action soon.

DoriAnn Hoffman, CPA, is a Manager at Smith Elliott Kearns & Company, LLC, who serves as a member of the Planned Giving Committee with the Fulton County Medical Center.

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A charitable bequest is one or two sentences in your will or living trust that leave to Fulton County Medical Center a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

"I, [name], of [city, state ZIP], give, devise and bequeath to Fulton County Medical Center Foundation [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to FCMC Foundation or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.

You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the potential tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to FCMC Foundation as a lump sum.

You fund this trust with cash or appreciated assets—and may qualify for a federal income tax charitable deduction when you itemize. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to FCMC Foundation as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and FCMC Foundation where you agree to make a gift to FCMC Foundation and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.

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