Money Talks | Jan. 1, 2015

By Melissa Myers and Michael J. Tucker, Jan. 1, 2015.

Michael Tucker: Hey, have you got any year-end tax planning ideas for our readers?

Melissa Myers: Well, while many of these ideas are tried and true, this year quite a few Arizona couples will be filing their taxes “married filing jointly” for the first time, and some special planning considerations will apply.

Tucker: That’s true. Couples who marry in 2014, even if they wait until Dec. 31, are considered married for all of 2014 for federal income tax purposes.

Myers: Most of those couples will choose to file “married filing jointly.” As we’ve emphasized in these pages in recent months, quite a few couples will owe higher overall tax liability as a result of the marriage.

Tucker: Yes, we regularly hear from couples that are blindsided by that. On the other hand, a few couples will save taxes by being married. Some have applied for and received tax refunds for prior years 2011 and 2012 during which they were married.

Myers: It’s important to recognize that couples that marry no longer have the option of filing with the IRS as single taxpayers.

Tucker: Consulting a CPA or enrolled agent or other tax preparer may be important for 2014 if it’s the first year for which a couple will file jointly.

Myers: If they’re newly married, the couple’s tax attributes, including deductions and credits, may blend in a way that saves them some tax here and there. Also, 2014 is the first tax year for which same-sex married couples will file their Arizona returns as married.

Tucker: That goes for couples that were already married whose marriages became recognized under Arizona law on Oct. 17, 2014.

Myers: Those couples will be recognized for Arizona income tax purposes for the entire year. No more filing a joint federal income tax return with the IRS and then having to file one of those irritating Schedule S forms with the Arizona Department of Revenue.

Tucker: That’s right. Same-sex married couples will transfer their tax attributes right from their IRS Form 1040 to their Arizona Department of Revenue Form 140.

Myers: Just like any other married couple that lived in Arizona the entire year.

Tucker: Exactly. The Arizona filing change for married couples won’t impact their state income tax liability, though.

Myers: Right. Arizona state income tax rate structures are the same for married couples as for individuals.

Tucker: What are some of the other tax planning ideas that readers can use in 2015?

Myers: Well, for those who are fortunate to have some cash left over after the holidays, they can make contributions to Arizona charities who offer programs to benefit charter schools, foster care, disabled children, military families and certain other categories.

Tucker: That’s right. Qualifying taxpayers will be able to use not only a federal income tax deduction, but also an Arizona state income tax credit.

Myers: It’s not too early to start thinking about making tax-deductible contributions to individual retirement accounts or other tax-deferred savings vehicles for retirement.

Tucker: Those over age 70 are still waiting to see if they can use part of the required distribution for their individual retirement account as a charitable contribution, thereby avoiding the tax on that distribution.

Myers: That depends on whether Congress retroactively extends the law, as it did at the end of 2013.

Tucker: Also, folks can consider making charitable contributions of appreciated stock rather than of cash.

Myers: This can be done at any time, preferably when the stock is at a relatively high value. This avoids the capital gains tax on the appreciation that goes to the charity.

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