New Year Tax Planning


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New-Year Tax Planning. . . Begin to Plan Now to Reduce Taxes for 2015





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— Kevin B. Perlberg,  CFP®

While most tax-planning articles are published at year end, we realize that it is beneficial to taxpayers to begin their planning as early as possible. We offer a number of suggested actions you can take at the beginning of this year that can reduce your tax burden. For example, consider tax deductions for:

  • Medical liability insurance;
  •  Retirement plans;
  • Health insurance;
  • Other employer-provided benefits for employees, employee wages, and employment taxes.


  • You can take steps now to accelerate deductions for this year and defer earnings to next year.
  • If you expect to sell an asset for a gain in 2015, consider postponing the sale until January 2016 and avoid the tax in 2015.
  • Two of the most effective tax-saving vehicles we have used with our clients who own their businesses are to combine and maximize contributions to defined benefit plans (DBPs) and defined contribution plans.

It may seem like a strange time to think about taxes, but we know that you can benefit significantly by beginning to make tax decisions early in the year. Step one is to make a date with your advisory team. Start to discuss your tax options as soon as you can.

You probably noticed that we just said advisory team. We recommend the team approach because of the complexity of the decisions that clients face. We believe strongly that planning should be conducted through a collaboration between the client and a team of financial specialists. The client can meet with the team at regular intervals and chart the best course of action for the year.

The essential first step is that you set up a meeting with your financial advisor. Once you get the ball rolling, the advisor can connect with your advisory team and you can begin this year’s planning in earnest.





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First Things

One of the first things you can do is maximize your retirement plan contributions. Another—if you have sold stock, real estate, or other assets that generate a tax on investment—is to search for losses in other assets that you can offset the gains. There are many interesting and effective options. Let’s explore some others.

Maximize Insurance-Related Deductions

Among the tax deductions to consider are those related to medical liability insurance, retirement plans, health insurance, and any other employer-provided benefits for employees, employee wages, and employment taxes. These are all deductible. The majority of businesses fail to take full advantage of employee benefit plan deductions. For instance, under the small business health insurance credit, the maximum deduction for 2014 was 50% for such plans. Financial professionals who specialize in tax deductions can help you be sure that you are always improving your economic efficiency.

Maximize Your Retirement Account Contributions

One of the most effective tax-saving vehicles we have used with our clients who own their businesses is to combine and maximize contributions to defined benefit plans (DBPs) and defined contribution plans (DCPs).

A great benefit of the DBP is that the contributor does not have to make contributions until he or she actually files the tax return. Remember, you can easily request filing extensions from the IRS. The contributor can remove the amount of the contribution from his or her taxes in one year but need not actually make the contribution until the final corporate extension deadline nine months later . This can give the investor additional time to accumulate the cash and make the contribution.

Use Non-Qualified and Non–Traditional Benefit Plans

Tax-qualified retirement plans include pension plans, profit-sharing plans, 401(k) plans, and others. These plans are called tax-qualified because contributions to the plans are generally tax deductible. In exchange for this favored tax status, the plans often have strict rules governing the amounts that can be contributed, who can participate, the ages beneficiaries must attain in order to withdraw the funds, and others.

In contrast, non-qualified benefit plans (NQBPs) and non–traditional benefit plans (NTBPs) have fewer of these types of restrictions and they have no penalty for early or late withdrawal. Non-qualified benefit plans and NTBPs are used by fewer employers, perhaps because they are complex. However, these plans can provide tremendous tax and retirement benefits while allowing important financial flexibility. It may well be worth your while to find a specialist in this area who understands the rules that cover these plans.

Reduce Your Taxes on Investments

As we’ve mentioned, if you anticipate a gain from a sale, it may be in your interest to see if you have losses in other areas that can offset those gains from the perspective of taxation. Most investors do not like to lose money on an investment but it is important to keep your overall financial picture in mind. While you may lose money on an individual investment, you may gain more than you have lost by offsetting your gains with losses elsewhere. This can be a complicated calculation, so consult with your advisory team as soon as possible to see if you can benefit from this strategy.

Another approach to consider if you are anticipating that you will sell an asset for a gain is to consider postponing the date of the sale until the next tax year and to defer the tax payment for an additional period of time. Again, you need to keep your entire financial picture in mind—or work with someone who does—and make the right decision for the reasons that are important to you. This is another complex calculation. We recommend consulting with your advisor to be sure that the decision benefits your overall financial picture.

Share Income with Lower-Income Family Members

Limited liability companies (LLCs) and family limited partnerships (FLPs) are used primarily for asset protection. You can use an LLC or FLP to significantly reduce your income tax burden as well. You can do this through income sharing. This means paying income through the LLC to the limited partners or members in your family who are in lower tax brackets. Many of our clients are in a 48% tax bracket (state and federal) and many of them have adult children who are in a lower tax bracket.

We advise these clients to reduce their own remuneration from the LLC and increase the amounts paid to these adult children and other family members who are in lower marginal tax brackets. The LLC can reduce taxes significantly on income earned by the assets it owns by offsetting the highly compensated members with increased payments to those in lower tax brackets.

Use a Charitable Remainder Trust to Reduce Income Taxes

The charitable remainder trust (CRT) is a planning tool that you can use to benefit a charitable entity while your family benefits as well. A CRT is an irrevocable trust that makes regular payments to you (or to both you and a family member) for a set period of time. What remains in the trust at the end of this period then passes to your chosen charity. The CRT carries a number of advantages for an investor.

The primary tax benefit of a CRT is that you receive a current income tax deduction for the value of the charity’s entire interest in the trust. The deduction is permitted when the trust is created, even though the charity may not receive the assets for years. The CRT is also a vehicle that can enhance your investment return. Because the trustee of the CRT pays no income taxes on the assets it holds or the revenues these assets generate. The CRT can generally be used to sell an appreciated asset without recognizing any gain for tax purposes. In this way, an annuity can enable the trustee to reinvest the full amount of the proceeds from the sale of an asset and generate larger payments for the life of the trustee.

Make Use of Donor Advised Fund

If you have not yet identified the charity to which you would like to give, but are certain that you will give, you can make year-end contributions to a donor advised fund (DAF). Assets can be distributed from the fund to specific charities in this tax year and in subsequent years. The taxpayer can receive an income tax deduction for the current contribution to the DAF even if the charity will benefit in future years. For instance, an investor could make a DAF contribution to a charity in 2015, take the deduction in 2015, and retain control of the funds in the meantime .

Create a C-Corporation to Run Part of Your Business with a Section-79 Plan

Many business owners use an LLC or S-Corporation to own their business. You can create significant tax benefits if you establish a C-corporation as a management entity for your LLC or S-Corporation. The C-corporation can be used to own your billing, employee benefits, human resources, and other ancillary services as a management company. This will be a separate business entity that enables you to utilize a section 79 plan to purchase various types of insurance. These costs can be as much as a 50% deductible from your taxes. If you can use a section 79 plan through a C-corporation, you gain additional insurance, as do your employees, and you pay less in taxes. Discuss this scenario with your advisor.

Build a New Office Building and Take Accelerated Depreciation Deductions

You can begin construction on a new office building this year and gain significant additional tax advantages. We advise you to establish an LLC to own the building. This allows your practice to pay rent to this new LLC.

We had a client who built a new building for her business and took accelerated deductions for depreciation at the value of the building. She took the depreciation deductions over a five-year period instead of over a 29-year period and immediately reduced her tax burden. This also enabled her to earn an additional $80,000 per year in tax-free income paid as rent to the LLC that owned the office building. We would be happy to review your corporate structures with you in order to attempt to identify similar opportunities.

Additional Tax-Saving Strategies

You may be able to deduct the cost of your car, truck, or other vehicle if you use it for business purposes. You cannot, however, claim mileage to commute to the office or for personal use. If you use the standard mileage deduction, in which you deduct a standard rate per mile set each year by the IRS, keep records of all miles and each trip’s purpose. If you use the depreciation method, there is a bonus depreciation on a new automobile in 2014 for a maximum deduction of $11,160 in the first year. If you have a luxury vehicle, there are limits on how much you can depreciate. We suggest that you do the math to determine which method works best for you.

Tips and gratuities that you gift during your work-related travels are also deductible. Make a record of every tip, including the airport luggage handler, the taxi driver, the restaurant server, and the hotel housekeeping staff. Bring these records with you to the meeting with your accountant.

The costs of equipment, office supplies, uniforms, advertising, and promotional material are tax deductible. Expensive equipment will be depreciated over several years. The IRS allowed an immediate deduction of as much as $500,000 in equipment purchases in 2014 and there was a 50% bonus depreciation allowance on all new equipment purchases.

Plan to Meet with to Your Tax Advisor

These are just a few of the many new-year planning tips that can help you reduce your taxes for 2015. It’s not too late and it can never be too early to start planning and making adjustments to maximize your savings. We can help you understand these tax-planning strategies, and better prepare you to start your new-year tax planning. Start your planning early so you can further enhance your savings and reduce your risk.

Kevin B. Perlberg, CFP®, is Managing Partner of Blackhawk Capital Partners. You can reach him at (480) 257-1600 or

Kevin B. Perlberg, Donald (Trace) W. Tendick, Tom Kueht, and Christopher Nei are registered representatives offering securities through United Planners Financial Services, member FINRA, SIPC. Advisory services offered through Blackhawk Capital Partners. Susan Brousseau and Michael Miller offer Advisory Services Only. Blackhawk Capital Partners and United Planners Financial Services are independent companies. *Neither United Planners nor Blackhawk Capital Partners offer tax advice.  Please consult your tax advisor for specific guidance.




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You might be surprised how many people have financial documents scattered all over the house – on the kitchen table, underneath old newspapers, in the hall closet, in the basement. If this describes your financial “filing system,” you may have a tough time keeping tabs on your financial life.

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