Tax Planning 101 says to defer income into the next year if you can, since it is better to pay a tax later than sooner. You get to keep the money in your account and can earn interest (good luck with that with today’s nonexistent interest rates – thank you Federal Reserve) or invest it for other gains and appreciation. An exception to that rule is if tax rates are going up – in that case, you might be better paying the tax in an earlier year at a lower rate.
Medicare surcharges are going up in 2018. Those surcharges are based on income earned in 2016. The higher rates will impact single seniors with incomes between $133,500 to $214,000, and married couples between $267,000 to $428,000. The rate increases will likely be as high as $1,000 for singles or $2,000 for joint filers.
Thus, senior taxpayers who are in or around those brackets should use care at the end of 2015 in trying to defer tax into 2016 – e.g., deciding whether to sell shares for a gain.To decide what works best, they will need to put pencil to paper to see what year yields the best overall result.