7 Smart Year End Tax Planning Moves


1) Harvest Capital Losses

Capital gains property includes stocks, bonds and mutual funds.  Currently, the stated rate on long term capital gains is 15%.  If you have a net loss after netting all of your gains and losses, the tax deduction is limited to $3,000. Any excess capital losses can be carried into the future.

2) Give Away Appreciated Property

Appreciated property is property that is worth more that its tax basis.  The tax basis is generally what you paid for an item.  By giving away appreciated property, you avoid the capital gains tax on this asset if you had sold it and then given the cash.

3) Maximize Annual Gifts

Taxpayers can make gifts of up to $13,000 per year to an unlimited number of people, without having to file gift tax returns or pay gift tax.  Granted, you don’t get an income tax deduction for this. However, these assets will be out of their estate.  The federal estate tax exclusion is $5 million and the state of Connecticut exclusion is $2 million. In the current economy, many children and grandchildren need all of the help they can get.

4) Self Employed Individuals Should Consider Establishing a Simplified Employee Pension (“SEP”)

While many taxpayers are eligible for an IRA or a Roth IRA, self employed individuals also have the option of establishing a SEP. A SEP allows a taxpayer to contribute the lesser of 20% of net income or $49,000 in 2011. Although, you do have until the due date of the returns including extensions to fund the SEP, it’s good idea to plan now if you will be using this vehicle.

5) Connecticut Taxpayers Should Fund a Connecticut CHET 529 Account

Connecticut taxpayers should fund the Connecticut 529 Plan.  This is called the Connecticut Higher Education Trust or “CHET.” Married couples filing a joint return are allowed to deduct up to $10,000 on their Connecticut income tax return.

6) Small Business Owners Should Accelerate Deductions and Defer Income

Many people own a small business; some even run their small business out of a home office. Most of these businesses are on the cash basis of accounting. Look at where you are profit-wise. By accelerating their expenses by paying them now and delaying billing, this will reduce taxable income.

7) Taxpayers Over Age 70 1/2 Should Consider Making Charitable Donations From Their IRA

Taxpayers over the age of 70 1/2 can make charitable donations from their IRA.  The distribution from the IRA is not included in their income.  On the other hand, they do not get a tax deduction for this; they do however get these assets out of their estate.  Additionally, this qualifies as part of their Required Minimum Distribution (“RMD”).


ACTION ITEM: Here are 7 Smart Year End Tax Planning Moves.  But you better hurry.  The year will be over soon.

Thomas F. Scanlon, CPA, CFP®

Photo by Creative Commons

Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has  recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.

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4 comments on “7 Smart Year End Tax Planning Moves
  1. Troy Brown says:

    I would really like thank you for the job you have done in writing this blog post.

  2. My husband left his IRA to a revocable living trust. If the trustee (my son) disclaims, will the IRA automatically pass to me? What do I need to do and what pitfalls and benefits might I see?

  3. Sean Barber says:

    What a fantastic blog and site i will be back to view more.

  4. Tony Kuzel says:

    Interesting point of view, thank you for sharing it.

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