It is that time of year when everyone is looking at New Year resolutions. We can help you keep one we hope you made – reducing your annual tax burden.


In managing your tax burden, taking advantage of all the deductions and credits available to you is essential. Those deductions include real estate, state & local and excise taxes, mortgage interest, mortgage insurance premiums, charitable contributions, gambling losses, medical expenses and student loan interest. The most common credits are education credits, but do not overlook foreign tax credits, childcare credits, or residential energy credits. Click here for a tax checklist to assist you in identifying all available deductions and credits.


Employer Sponsored Plans

When cash flow allows, maximize payments into your employer sponsored retirement plan. The limit for 2015 is $18,000. If a company match is available, retirement contributions should be made to take advantage of up to the full amount of the employer match. These investments in your retirement account reduce your taxable income for both federal and state purposes on a dollar for dollar basis. To be deductible for 2015, contributions are required to be made by December 31, 2015.

Traditional IRA’s

Funding a traditional IRA is a reduction of your taxable income for both federal and state income purposes. For 2015, $5,500 is the combined maximum annual contribution to all IRAs. This amount is increased to $6,500 for those persons 50 and older. Unlike most deduction which must be paid within a given calendar year, your traditional IRA contribution can be made through the filing of your tax return up through April 15, 2016.

Traditional IRA’s are generally deductible however the deductibility is limited for higher-income earners who are active participants in an employer sponsored plan. Please call us with questions about the phase out levels.


In our investing, we often focus on our financial goals, our risk tolerance and the timing of our financial needs. Tax implication should play a role in your investment decisions as well. Understanding your effective tax rate will allow your financial advisor to properly manage the tax effects related to your investment portfolio. For high-income earners, tax exempt income and municipal bonds may be important. Review your portfolio with your investment advisor to understand if capital gains have been achieved in 2015 and if there is an opportunity to sell positions that may carry a loss that can be used to reduce those capital gains. You may also want to discuss ETFs (exchange-traded funds) and indexed mutual funds which usually have low portfolio turnover – producing less capital gains. ETFs and Indexed Mutual funds typically have a passive management style with lower management costs.


Although not a reduction in your tax burden, adjusting your annual tax withholdings through your W-2 is an important aspect of managing your tax burden. By reviewing your federal, state and local withholdings, we can make recommendations to insure you are taking them appropriately for the income being earned through that employer. The total income within your return from a spouses’ W-2, investment earnings, and other business or personal earnings may affect your withholdings. Through your employer, your federal withholdings can be changed by completing a new W-4 and your state withholdings by completing a WH-4.


In the final review of your annual tax burden, also consider the effect of the alternative minimum tax. The AMT was initially designed to prevent high-income earners from utilizing “tax loopholes” to avoid paying income taxes. The AMT is a second tax calculation that eliminates various tax deduction, exemptions and credits. Individuals must calculate their taxes under both tax methods and pay the higher of the two taxes. Even with changes by Congress in 2012, many taxpayers will pay the AMT.

Please use us as your resource to understanding the ever changing & complex tax code. We are always happy to answer questions, and to serve as your guide through the rules and regulations.

Share →