Broker Check

2015 Tax planning (Archived)

November 23, 2015

Year-end planning

Year-end tax planning is especially challenging this year because Congress has yet to act on a host of tax breaks that expired at the end of 2014. Some of these tax breaks may be retroactively reinstated and extended. However, Congress may not decide the fate of these tax breaks until the very end of this year (and, possibly, not until next year).

Some of these tax breaks, include:

  • the option to deduct state and local sales and use taxes instead of state and local income taxes;
  • the above-the-line-deduction for qualified higher education expenses;
  • tax-free IRA distributions for charitable purposes by those age 70-1/2 or older; and
  • the exclusion for up-to-$2 million of mortgage debt forgiveness on a principal residence.


Higher-income-earners have unique concerns to address when mapping out year-end plans. They must be wary of:

  • the 3.8% surtax on certain unearned income; and
  • the additional 0.9% Medicare (hospital insurance, or HI) tax that applies to individuals receiving wages with respect to employment in excess of $200,000 ($250,000 for married couples filing jointly and $125,000 for married couples filing separately).

The additional Medicare tax may require year-end actions. Employers must withhold the additional Medicare tax from wages in excess of $200,000 regardless of filing status or other income. Self-employed persons must take it into account in figuring estimated tax. There could be situations where an employee may need to have more withheld toward year end to cover the tax.

For example, an individual earns $200,000 from one employer during the first half of the year and a like amount from another employer during the balance of the year. He would owe the additional Medicare tax, but there would be no withholding by either employer for the additional Medicare tax since wages from each employer don't exceed $200,000. Also, in determining whether they may need to make adjustments to avoid a penalty for underpayment of estimated tax, individuals also should be mindful that the additional Medicare tax may be over withheld. This could occur, for example, where only one of two married spouses works and reaches the threshold for the employer to withhold, but the couple's income won't be high enough to actually cause the tax to be owed.

Action items

We have compiled a list of actions based on current tax rules that may help you save tax dollars if you act before year-end. If you are a current client, we will share these strategies with you soon. If you are not a current client, contact our office at 301-585-4700 and request the year-end tax planning list. Not all actions will apply in your particular situation, but you will likely benefit from many of them.


Eric Bailey, CFP ®, CMFC

Lincoln Financial Advisors Corp. disclosures:

The content of this material was provided to you by Lincoln Financial Advisors Corp. for its representatives and their clients.