Although the close of another year is rapidly approaching, you still have time to implement tax planning strategies to reduce your 2015 taxes. While these strategies can vary based upon your age, income and financial situation, the following are some commonly used tax saving ideas.
Accelerate Deductions and Defer Income (or Vice-Versa)
Why pay tax now when you could pay later? Generally, you want to accelerate deductions and defer income. There are plenty of income items and expenses you may be able to control. Consider deferring bonuses, consulting income or self-employment income. On the deduction side, you may be able to accelerate state and local income taxes, interest payments and real estate taxes. When following this strategy you must consider the alternative minimum tax.
There may be situations where it may be beneficial to delay deductions until 2016 and accelerate income into 2015. For example, if your tax bracket will be higher in 2016 than 2015, you should consider this strategy.
Manage Your Gains and Losses
Capital gains and losses provide opportunities for deferral because you have control over when you sell them, but be careful when generating losses. You can generally offset capital losses against capital gains and up to $3,000 of other income. If you buy the same security within 30 days before or after you sell it, you cannot use the loss under the wash sale rules.
Bunch Itemized Deductions
Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductible expenses into one year can help you exceed these AGI thresholds. Consider scheduling your expensive non-emergency medical procedures in a single year to exceed the 10 percent AGI floor for medical expenses (7.5 percent for taxpayers age 65 and older). This may mean moving a procedure into this year or postponing it until next year. To exceed the 2 percent AGI floor for miscellaneous expenses, bunch professional fees like legal advice and tax planning, as well as unreimbursed employee business expenses.
Donate to Charity
Another excellent way to reduce the amount of tax you owe is to make a tax-deductible donation to charity. Deductions are available for donations of property, money and out of pocket expenses incurred while providing services to a charitable organization. However you decide to donate, make sure that you obtain a receipt from the organization so that you have evidence of the donation for tax purposes.
Retirement Plan Contributions
If you are eligible to participate in an employer-sponsored retirement plan such as a 401k plan you should do so and try to maximize your contributions. Taxpayers can contribute up to $18,000 to their 401k in 2015 and a “catch-up” contribution of up to $6,000 is permitted for individuals age 50 or older.
IRA contribution limits in 2015 are $5,500 with a catch-up contribution of $1,000. IRA contributions for 2015 can be made as late as April 18, 2016.
Get Started Now
The tax planning consultants at East Coast Tax Consulting Group are ready to meet with you and develop a tax savings strategy that is tailored to your situation. Call us today at 561-826-9303 to schedule an appointment.