Summer is a Time for Tax Planning; Really!

Thomas R. Tartaglia, CPA (Jun, 2014)


As F. Scott Fitzgerald so eloquently said, “And so with the sunshine and the great bursts of leaves growing on the trees, just as things grow in fast movies, I had that familiar conviction that life was beginning over again with the summer.”  You might be asking yourself what this has to do with taxes and tax planning. Well, nothing really except that it just serves as a reminder that as the seasons change, it is also a good time to take a fresh look at your tax planning objectives. Before you know it, you’ll be saying where has the summer gone?

This year alone, tax changes will impact almost everyone required to file an income tax return. And if you include the new health care mandates, even individuals not required to file will be impacted by changes.

Some personal things to think about now:

  1. Has or will your personal status change before the end of the year? Will you get married or divorced, start a family or buy/sell a home?
  2. Are you contributing the maximum into your retirement plan? You should be contributing throughout the year and not just at the year-end. The three most common types of plans are employer sponsored, Traditional IRA and ROTH IRA. Saving for the future is important and as you know Social Security benefits will only replace part of your earnings. According to the Social Security Administration, as of 2013 the average monthly benefit is $1,294 per month.
  3. Are you up to date with your estimated tax payments? If you are required to pay quarterly estimated taxes, the April 15th payment date has passed and the June 15th payment is now due. Summertime is the time to reassess your estimated tax liability because you still have time to adjust your upcoming September and January payments.  
  4. Review your investment portfolio, do you have unrealized gains or losses that should be realized between now and December 31st? With the recent gains in the stock market, now may be a good time to “rebalance” your portfolio. Just remember that your net investment income may be taxed by the additional 3.8% surcharge.
  5. Instead of selling your appreciated stock, gifting the stock to a charity has several tax benefits. 1.) You’ll be able to claim a charitable deduction for the fair market value of the stock (not your cost basis), 2.) You do not have to report the appreciation as taxable capital gains, 3.) Since you avoid the gain you also avoid the 3.8% net investment tax surcharge.
  6. Do you have a business trip planned that you could incorporate some R&R or do you have a vacation trip scheduled that you could incorporate some business? Either way, some of your travel expenses could be considered deductible business expenses.
  7. If you have small children attending day camp this summer, keep track of the costs as they may qualify for the dependent care credit.
  8. If you haven’t already done your spring cleaning, those treasures in the basement may qualify as a deduction if donated to charity. And don’t forget to get a receipt! The IRS requires documentation regardless of how small the item is.  
  9. Set up your 2014 tax file; if you do nothing else, accumulating all your tax documents into one place will put you ahead of the game come next spring.

If you are a business owner:

  1. Consider Section 179 expensing limits. Currently the deduction has been reduced to $25,000 plus an inflation adjustment and the 50% bonus deduction has been eliminated (see “extenders” below ). Note; In 2013 the Sec. 179 deduction was $500,000 .
  2. Are you taking full advantage of your business pension/profit sharing plan contributions?
  3. There are many business credits that are still available although some have expired and may be re-instated retro actively to 1/1/2014(see “extenders”). The Small Business Health Care Tax Credit is still available but has been changed significantly for 2014.


Efforts to renew some of the $85 billion in tax credits will most likely be put off until after the midterm elections in November. This is a bill that includes extensions of many popular tax credits that had previously expired at the end of 2013 and are currently unavailable for 2014.  Below is a partial list of some of the more popular credits that are included in the proposed legislation.

Business Tax Extenders:

-          Extension and modification of research credit.

-          Extension and modification of new markets tax credit.

-          Extension and modification of employer wage credit for employees who are active duty members of the uniformed services.

-          Extension and modification of work opportunity tax credit.

-          Extension of 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.

-          Extension of bonus depreciation.

-          Extension and modification of increased expensing limitations and treatment of certain real property as section 179 property.

-          Extension of temporary exclusion of 100 percent of gain on certain small business stock.

-          Extension of reduction in S-corporation recognition period for built-in gains tax.

-          Extension of empowerment zone tax incentives.

Energy Tax Extenders:

-          Extension and modification of credit for nonbusiness energy property.

-          Extension of credit for energy-efficient new homes.

-          Extension and modification of energy efficient commercial buildings deduction.

Individual Tax Extenders:

-          Extension of Deduction for expenses of elementary and secondary school teachers

-          Extension of exclusion from gross income of discharge of qualified principal residence indebtedness.

-          Deduction for mortgage interest premiums.

-          Above-the-line deduction for higher education expenses.

-          Tax-free distributions from individual retirement plan for charitable purposes.

With our long winters and extended spring season we understand that when summer finally hits, you want to hit the road, get out onto the golf course or just relax in your back yard Ramada. Just know that your tax professional at Dermody, Burke and Brown is here ready to assist you at any time.  


The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent tax law changes, if any.

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