As the calendar approaches the end of 2015, it is helpful to think about ways to shift income and deductions into the following year. For example, spikes in income from selling investments or other property may push a taxpayer into a higher income tax bracket for 2015, including a top bracket of 39.6 percent for ordinary income and short-term capital gains, and a top bracket of 20 percent for dividends and long-term capital gains. Adjusted gross incomes that exceed the threshold for the net investment income (NII) tax can also trigger increased tax liability. Accordingly, traditional year-end techniques to defer income or to accelerate deductions can be useful.

Techniques for deferring income include:

  • Hold appreciated assets
  • Consider a tax-fee like-kind exchange or property if disposing of appreciated assets used for investment or in a business
  • Sell depreciated capital assets, especially if capital gains have been realized
  • Hold U.S. savings bonds
  • Sell property on the installment basis
  • Defer bonuses earned in 2015 until 2016
  • Make salary-reduction contributions into employer-sponsored plans, such as 401(k) plans, 403(b) plans, and 457 plans and into flexible spending accounts
  • Minimize retirement distributions
  • Defer billings and collections
  • Recharacterize a Roth IRA as a traditional IRA if the traditional IRA was converted to a Roth IRA in 2015, and the assets in the Roth IRA have subsequently declined in value

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