December 14, 2015
The clock is ticking on 2015 and with it your opportunities to potentially minimize your tax liability.
With year-end fast approaching, here are a few key tax laws from The Private Client Reserve’s white paper “Tax Planning Considerations for 2015” that you might like to discuss with your tax and legal advisors before the end of the year:
Tackling Tax Brackets
One of the most important planning steps is “tax bracket management,” which involves taking steps to manage income to avoid moving into a higher tax bracket. This is particularly significant for married individuals filing a joint return who are nearing the 39.6 percent tax bracket ($464,850 or higher).
As you begin managing your funds, it’s crucial to understand that even if your total income level puts you in a certain tax bracket, not all income will be taxed at that level. This is because federal income tax applies on a graduated basis as your income level rises.
Other taxes that take effect if you hit certain income thresholds include:
- Medicare surtax – A 0.9 percent surtax on wages for unmarried individuals earning more than $200,000 and married couples filing jointly earning more than $250,000.
- Net investment income tax – A 3.8 percent tax applies to investment income including interest, dividends, capital gains, rental and royalty income, and more. This affects single taxpayers with modified adjusted gross income (MAGI) of $200,000 or more and married couples filing jointly with $250,000 or more of MAGI.