Year end tax tips

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10 Year-End Tax Moves For 2015

1. Give generously to charity• If you itemize

deductions, your charitable contributions can get you a nice tax deduction.

• You can deduct the cash you donate, as well as the value of any property you give.

• You can even donate stock, which can help you avoid capital gains taxes as well.

Photo: Flickr user Howard Lake

2. Harvest your losses• If you sell any

investments at a loss, you can offset your capital gains.

• Even if your losses exceed your gains, you can use up to $3,000 in losses to reduce your taxable income.

• This is known as “tax-loss harvesting”

Photo: 401kcalculator.org via Flickr

3. Can you defer some income?• If you are expecting a

year-end bonus, ask your boss if you can have it after December 31.

• And, if you’re self-employed, consider waiting until the new year to send out any outstanding invoices.

• Deferring some of your income until 2016 will reduce your 2015 income tax.

Source: Flickr user Steven Depolo

4. Boost your retirement contributions

• You are allowed to contribute up to $18,000 to your 401(k) in 2015 ($24,000 if you’re over 50).

• Contributions are made on a pre-tax basis and will reduce your taxable income

www.aag.com via Flickr

• If you contribute to an IRA, you have until April 15 to make contributions for the 2015 tax year.– If you don’t have an IRA yet, you can open one now

and still have about five months to max out your contributions for 2015.

– You can contribute up to $5,500 to an IRA ($6,500 if over 50), and you may qualify for a tax deduction.

• However, 401(k) contributions usually need to be made before the end of the calendar year.

5. Make your January mortgage payment

• If you itemize deductions, you can deduct the mortgage interest you paid in 2015.

• By making January’s payment earlier, you could have more interest to deduct.– However, you cannot

pre-pay interest that will accrue in 2016 Wikipedia user Idoysterbay

6. Pay the tuition bill now• If you pay college

tuition for yourself or someone else, it may be a good idea to send in Spring’s tuition early.

• Education tax credits and deductions are based on when you actually pay the tuition, not when the semester starts.

www.TaxCredits.net via Flickr

• The American Opportunity Tax Credit provides a refundable credit of up to $2,500 for the first four years of college.

• The Lifetime Learning Credit provides up to $2,000, and can be used beyond four years.

• Or, you can use tuition and fees as a deduction.• All of these are subject to income limitations, so

check out each one to see which benefits you the most.

7. Give away your money• If you have a substantial

amount of money and assets to leave your heirs, you can use the annual gift tax exemption to reduce the eventual estate taxes.

• You can give up to $14,000 per person, per year, that doesn’t count toward the lifetime estate tax exemption.

www.SeniorLiving.org via Flickr

• For 2016, there is a lifetime exemption of $5.45 million from estate taxes.

• However, if you start to give money to your heirs now, it can reduce the burden later on.

• The top Federal estate tax rate is 40%, so strategic gift-giving can save a lot of money over the years.

8. Use your FSA money • The “use it or lose it”

rule for Flexible Spending Accounts has gotten a little more lenient.

• Account holders are allowed to carry over up to $500 to next year, but your employer must adopt this change. www.TaxRebate.org.uk via Flickr

• Find out if you can carry any of your account over to next year.

• If you have more money in your account than you can carry over, make sure you use it before the end of the year.

9. Update your W-4• If you receive a

large tax refund for 2015, it means that your employer is withholding too much money from your paychecks.

• If this applies to you, update the exemptions listed on your W-4.

Flickr user frankieleon

• A tax refund is nice to get, but it is really an interest-free loan you’re giving to the government.

• It’s smarter to get larger paychecks throughout the year instead.

• Make sure your W-4 reflects an accurate number of exemptions that you’re entitled to.

10. Safeguard your identity• Unfortunately, tax

season is the favorite time of year for many criminals.

• Take steps to protect your identity, and to avoid tax-related scams. www.gotcredit.com via Flickr

• The IRS publishes a list of the most prevalent tax scams each year.• For 2015, these include:

– Callers posing as IRS agents to collect “delinquent taxes”– Email phishing scams– Identity theft – criminals filing a bogus tax return in your name to

receive a refund.• Some steps you can take to avoid scams include:

– File your tax refund as early as reasonably possible.– By far, the best way to avoid scams is to know what to look for.

This IRS resource is an excellent overview of current scams and how to spot them.

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