If you are like most individuals at this time of the year, you probably don’t give too much thought to your taxes and perhaps putting it off until the filing deadline for tax returns approaches being in the spring of each year for most.
For those who are beneficiaries of a trust for instance and expect to receive income distributions, or in a separate context, those who are developing a plan that contemplates some significant charitable giving, they may want to take some immediate action to accelerate or decelerate their plans depending on the circumstances.
As most of you are aware, new personal tax rates are about to take effect January 1, 2016. The federal tax rate on taxable income over $200,000 will increase from the current rate of 29% to a rate of 33%. The second lowest tax rate, the rate that applies to taxable income between approximately $45,000 and approximately $89,000 will drop from the current rate of 22% to a rate of 20.5%.
Thus in the circumstances where beneficiaries of a trust will likely receive distributions of income from the trust and those same beneficiaries will likely earn income in excess of $200,000 for the next few years, they will want to consider, if possible, accelerating more income distributions into the 2015 year to save some taxes. The opposite might apply to those beneficiaries in the lower tax bracket described above. They would benefit from a deferral of income distributions to 2016, to a lesser extent perhaps.
For those individuals considering charitable donations particularly significant ones for estate planning or as part of an overall plan of charitable giving, donations made after 2015 that exceed $200 will be eligible for new tax credit rate of 33% to the extent the individual has income that is subject to the new 33% personal income tax rate, in which case they may want to consider decelerating their plans in this regard such that the donation(s) are made in 2016 or later.
I would not hesitate consulting with your pros to make sure the actions taken are appropriate to your circumstances. Don’t be surprised if they appear a bit harried when you do approach them. They are a tad busier than normal.