Year-end tax planning – 2015 checklist

Know your taxes! I am a big fan of the philosophy: No one cares more about your money than you do. Even if a professional prepares your taxes every year, learn to do it yourself. Aside from what you'll save in fees, here are two benefits of learning to prepare your taxes yourself:

  1. By doing your taxes on your own, you can learn quite a bit about your finances and get a lot of ideas on how to make your money work more for you.
  2. Sometimes a professional might not ask the right question because they don't know everything that went on in your life this year. If you learn to prepare your taxes yourself, you will become more aware if a professional is missing any deductions.

Educate yourself. This is an excellent place to start — IRS tax tips.

If a professional prepares your taxes…

Set up a meeting with your accountant/tax adviser.

Red string bow on finger as a reminder

If someone else does your taxes, set up a meeting with them now instead of waiting until the new year arrives. This provides two great benefits:

  1. Your adviser will have a lot more time to spend with you now than during the tax season. Meeting with your tax professional now allows them to carefully consider all scenarios and advise you on how best to structure your finances to be tax efficient.
  2. You can implement the suggested strategies right way as there are still two more months in the 2015 tax year of which to take advantage.

2015 checklist

  1. Calculate your current year's estimated income. Add up your salary, any expected bonuses and other income (from side gigs, state tax refund, etc.)
  2. Estimate next year's income. Do the above for next year. Yes, it will be a guess, but give it your best shot.
  3. Maximize your retirement contributions.
    • Are you maxing out your 401(k)? If not, can you tighten your belt for a couple months and add an extra 1 to 2 percent to your contribution?
    • Do you have an IRA? If not, can you open a Roth IRA (or traditional IRA) and fund it?
  4. If you expect your income to go up significantly next year, you might want to move up your capital gains and income to this year so you can pay lower taxes on those.
  5. If you expect your income will go down instead, it might make sense to decelerate income and move it to next year.
  6. Review opportunities for tax-loss harvesting to offset realized gains.

If you have kids…

  1. Open a 529 account to take advantage of tax savings with your state (if applicable).

Review the possibility of bunching deductions

Do a rough tax preparation and review if you can maximize the above-the-line deductions (IRA, HSA, moving expenses, self-employed health insurance, etc.).

What is bunching and how does it help?

We bunch our deductions together and itemize them every other year.  We use the standard deduction in the intervening year.

For example:
Let us assume that you file your taxes as married couple, filing jointly with no dependents. And then let us assume, further, that your mortgage deduction is $5,000 per year and you donate $5,000 to charity every year (among other deductions like medical expenses).

Standard deduction

Here's how the standard deduction works in that case:

Tax Year 2015: Your itemized deduction amount will be $10,000 (over simplifying this for illustration); and your standard deduction amount will be $12,600.

Tax Year 2016: Your itemized deduction amount will be $10,000; your standard deduction will be $12,600 (estimate).

As the standard deduction is more than itemized deductions in both years, you will take the standard deduction. Total deductions: $25,200.

Bunching scenario

Here's how the bunching scenario works in that case:

Your mortgage deduction is still $5,000 per year and you donate $10,000 to charity every other year.

Tax Year 2015: Your itemized deduction amount will be $5,000 (again, over simplifying this for illustration); and your standard deduction amount will be $12,600.

Tax Year 2016: Your itemized deduction amount will be $15,000; and your standard deduction will be $12,600 (estimate).

So in this case, you will take the standard deduction in Tax Year 2015 and itemize during Tax Year 2016. Total deductions: $27,600.

Essentially, you will have alternating lean and fat deduction years.

Pushing the bunching method further

This is a simplified example, but you can push this even further to maximize all possible deductions in Tax Year 2016.

  • Can you prepay your mortgage and push part of the $5,000 from Tax Year 2017 to Tax Year 2016?
  • Can you do the same with property taxes and/or medical expenses?

Bunching deductions in fat years and lean years

Bunching deductions not only helps you take more in deductions, but it also helps with exceeding minimums set for certain deductions.

After doing the calculations in the above point, see what action to take in a fat year versus a lean year:


Fat Year



Lean Year



Checklist Item



Charitable and other deductions: Calculate your charitable contributions so far, mortgage interest, medical expenses, etc., and contribute more.


Alternatively, if this is a lean year, you can start targeted saving accounts for each of these and start saving money you would have contributed to charity to contribute in bulk for next year.


Contribute your appreciated stock to charity instead of straight-up cash. This will allow you not to pay capital gains on the appreciated stock and the charity will get the same amount of money in stock.


If you are considering a big purchase like buying a car and you live in an income-tax-free state, consider buying them before the end of the year (again, if it is a fat year) to get the sales tax deduction.


Postpone the purchase until 2016 if this is a lean year.


If you want to maximize deductions for this year, pay college costs early.



If you have a Flexible Spending Account, plan to spend the entire amount before you lose it at the end of the year.


If you have a Health Savings Account, you can increase the contributions to take the maximum deductions for this year.


If you have lower income this year, talk to your financial adviser to see if it makes sense to convert part of your nest egg to a Roth IRA.

Miscellaneous checklist items

  1. If you are above 70 ½, take your required minimum distributions.
  2. Beware of the Alternate Minimum Tax (AMT). It was created for the rich; but by not keeping up with inflation, the AMT has been hitting more and more middle class families. Check if you will be hit with the AMT. That changes the deduction landscape quite a bit and will need a different plan.
  3. Adjust your withholding. There is enough time to adjust your withholding if you find that you have not paid enough taxes for this year. You can either estimate the taxes and adjust your withholding or pay 100 percent of your last year's tax liability (110 percent if your adjusted gross income, or AGI, will be more than $150,000) and avoid a penalty.

Plan for the future

The following items are not directly related with the 2015 year-end tax planning but will help with 2016 tax planning and make it a lot easier.

  • Start a filing system to keep all your deductions/receipts organized and easy to find.
  • Based on the amount you spent this year on medical expenses, review your current health insurance and see if there is a better option that meets your need when the open enrollment rolls in.
  • Adjust your HSA/FSA amount for next year.
  • Adjust your withholding for the year 2016 so that you don't overpay or underpay.

What's on your tax preparation checklist this year?

More about...Planning, Taxes

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