As the year draws to a close, you should run through this last-minute checklist of tax planning issues that can help you keep more of your hard earned money or avoid any tax problems!
Max Out Your Work Retirement Accounts (401(k), 403(b), etc). You can contribute up to $18,000 in your 401(k) for 2015. If you haven’t contributed that max and are able to, the deadline is December 31. You may also get free money if your employer matches and potentially lower your tax bracket. There are many benefits to contributing! If you have a SEP, SIMPLE, Traditional, or Roth IRA, you have until April 15th of next year to contribute for 2015.
Make Charitable Donations. Now is a great time to review any charitable contributions you’ve made throughout the year and determine if you can do more. Many people donate to charity throughout the year, so gather up any receipts you’ve collected, especially the ones Goodwill or other donation centers have provided you.
Manage Health Care Costs. If you have health care issues, bunching itemized deductible expenses into one year can help you exceed the adjusted gross income floors to take the deduction. If possible, you should consider scheduling costly, non-urgent medical procedures in a single year to exceed the 10% AGI floor for medical expenses (7.5% for taxpayers age 65 and older).
Make Up Tax Shortfalls With Increased Withholding. Don’t forget that certain kinds of taxes are due throughout the year. Check your withholding and estimated tax payments while you have time. If you are in danger of an underpayment penalty, you can try to make up the shortfall by increasing withholding on your salary or bonuses. If you have a bigger estimated tax payment, you may have to pay penalties.
Watch for Extensions (or Not) of Widely Used Tax Breaks. Lawmakers will have to decide whether to extend popular tax provisions before the end of the year. Any changes may impact your tax planning decisions. Here are some provisions that are affected:
- Taxpayers aged 70 ½ and older making tax-free charitable contributions to IRAs
- Businesses deducting up to half of eligible equipment placed in service this year
- Students and parents receiving an above-the-line deduction for tuition expenses
- Companies receiving a credit for qualified research expenses
- Taxpayers in states without an income tax or military personnel that claim states like Washington, Texas and Florida, deducting state sales taxes
- Teachers receiving an above-the-line deduction for $250 in classroom expenses
Determine State Residency Status. If you split your time between two different states throughout the year, consider where you may be taxed as a resident for 2015. Make sure you track the number of days you are spending in each state. Generally, if you live in a state for 183 days or more (in Hawaii it is for at least 200 days), that state will assert residency and the ability to tax all income. If you move to a new state but maintain significant contacts with the old state (including driver’s license, residences, bank accounts and the like), you could run the risk of being taxed as a resident.
What’s in store for 2016?
The IRS recently released the 2016 Federal Income Tax Brackets:
Here important SMART tax planning tips to help you take advantage of tax benefits, invest for retirement in a tax-efficient manner, and share your wealth with loved ones! Check back here as we continue to update the updated tax rules and strategies for you! Which Tax Preparation Service or Software Should You Use? – A comparison on the different tax preparation options. 2015 Updated Contribution Limits for Retirement and Qualified Accounts Tax Tips
- 2014 End of the Year Tax Benefits Part 1
- 2014 End of the Year Tax Benefits Part 2
- Tax-Loss Harvesting – Tax Efficient Investing and Important Tool to Reduce Taxes with Higher Gains!
- 2013 End-Of-Year Tax Planning and Tips Part 1
- 2013 End-Of-Year Tax Planning and Tips Part 2
- 2013 End-Of-Year Tax Planning and Tips Part 3
- Tax Tips: Reduce Taxes With Miscellaneous Deductions
- Tax Tips: Tax Rules for Early Retirement Plan Withdrawals
- Your Pet Expenses Might be Tax Deductible
- Commonly Overlooked Tax Deductions
- Tax Breaks For Homeowners
- A Good Time For Tax Planning
Understanding Tax-Qualified Retirement Accounts
- Investment Terms Glossary
- How Your Retirement Benefits Will Change in 2015
- Is The Roth IRA Right For You Part 1
- Is a Roth IRA Right For You Part 2
- SMART 401(k) Investing
- How Much Will My Bonus Net After Taxes?
- Top Retirement Account Errors
- IRAs For Retirement and Inheritance
- Tax Mistakes To Be Avoided
Protecting Yourself from Tax Fraud
- Credit and Tax-Return Breaches – How to avoid credit card breaches and identity theft!
- Watch Out for “Free Money” Tax Scams
- Tax Tips: Watch Out for Tax Preparer Fraud