I know you would rather start preparing for the holidays, but this is a great time to make some end of season tax moves to help lower your tax bill and increase your tax refund come tax time since once the year ends so do most of your opportunities to reduce your taxes. Mike McVay has geared up for a very streamlined tax season. New offers and new technology will make for a great tax season for his clients. 850.725.5696 - www.MikeMcVay.com
Here are 10 quick and easy end of year tax tips you still have time to take advantage of:
1. Gather forms, and receipts. I know it may seem a little early but gathering receipts for tax deductible expenses and sources of income for the past year will keep you organized and ensure you don’t forget anything when you sit down to do your taxes.
2. Defer Bonuses. If your hard work paid off this year and you are expecting a year-end bonus, this extra money in your pocket may bump you up to another tax bracket and increase your tax liability. If you can hold off on seeing any extra income this year see if your boss will pay you your bonus in January. You will still receive it close to year-end, but you won’t have to pay taxes on it when you file your 2015 taxes.TurboTax TaxCaster can help you see where you stand with and without this income.
3. Accelerate Deductions, Defer Income
There are a handful of deductions that are recognized the year in which you spend them. For example, you get a mortgage interest deduction and if you make an extra mortgage payment on December 31st, you can claim that deduction on this year’s taxes. This lets you take the deduction immediately rather than wait an additional 12 months, when you do your taxes for next year.
4. Donate to charity. The holidays are a great time to get organized for the New Year and clean out clothes and household goods while giving to those in need. You can help someone in need and reap benefits of a tax deduction for non-cash and monetary donations donated to a qualified charitable organization. If you volunteer at a qualified charitable organization don’t forget that you can deduct your mileage (14 cents of every mile) driven to charitable service. TurboTax ItsDeductible will accurately value and track your yearly-donated goods. Make these donations count on your taxes by donating by December 31st. Even if you make a donation by credit card, you do not have to pay it off in 2015 to receive the tax deduction.
5. Take a class. Taking a course to advance your career is also a great way to boost your tax refund. Paying for next quarter’s tuition by December 31st may give you a valuable tax credit up to $2,000 with the Lifetime Learning Credit.
6. Maximize your retirement. Another great way to reduce your taxable income while building your nest egg is to make a contribution to your retirement savings account. Whether you contribute to a 401(k) or a Traditional IRA, you can take a dollar for dollar reduction in your income and also save for the future. The contribution limit for 401(k)s for 2015 is $18,000 ($24,000 if 50+) and for a Traditional IRA it’s $5,500 ($6,500 if 50+).
7. Spend your FSA. If you have a Flexible Spending Account and you have money left get caught up on your doctor’s visits. The old “Use it or lose it” rule may not still apply, but If you have unused money in your FSA account on December 31st, you may only be able to carry over up to $500 into your 2016 FSA or your plan may limit the amount of time to 2-1/2 months after the end of the plan year to use your funds.
8. Offset investment gains. Chances are you have a few investments in your portfolio that have gone down in value, you can recognize your losses and use them to offset investment winners. In order to take advantage of this, you will need to sell the losing investments and offset your losses against your gains recognized. If your losses exceed your gains, you can apply $3,000 of that against your regular income. Any extra will then be passed onto the next tax year.
9. Estimate your household income for Marketplace Insurance. Are you applying for a subsidy or discounted insurance in the Health Insurance Marketplace this open enrollment season? If so, you will have to project your 2016 household income and family size when you apply. Start looking into any changes that may take place in 2016 (growing your family, job promotion, heading into retirement, etc.). These changes may affect the amount of subsidy you are given to help you pay for insurance.
10. Increase Your Marketplace Premium Tax Credit. If you received assistance for Marketplace Insurance in the form of an Advanced Premium Tax Credit one smart move you can make is to lower your adjustable gross income by contributing to your retirement plan, which may increase the premium tax credit you’re eligible for at tax time. If you are purchasing new insurance in the Marketplace you can also request to take half of your assistance to help you pay for insurance up front instead of the entire amount to alleviate having to pay anything back if you experience any changes to your income.