Last week, we tied a bow around all of our client tax returns for 2015, i.e. for “tax year 2014”, as the extension deadline came and went. It feels good to turn the page and move into our intensive preparation season for tax season 2016.
(And now I’m searching for a third metaphor for that paragraph — which it needs like a fish needs a bicycle.)
Over the weekend, we also found out that when the US Treasury closed its books for our government’s 2015 fiscal year on September 30, they had taken in a record $3.25 trillion in payments from US taxpayers (and yes, that’s trillion with a “tr”). The $3,248,723,000,000 was the most tax ever collected here (maybe anywhere?), and represents an 8% increase over last year’s figure.
And, well, the feds still operated at a deficit, even under that figure.
Hopefully, you and your family have figured out how to operate on a budget more effectively than has the Congress.
And while we’re still waiting for Congress to make some decisions about extending certain tax credits for THIS year (which they *should* do by the end of the year, but you never know), well, we’d love to help you make some smart moves that will pay off on your tax bill, no matter what might come down the pike.
You’ll hear from me more than once on this sort of thing … but now’s a perfect time to start in on some of them.
Here are eleven simple things you can do before the end of the year to keep your income taxes as low as possible next year. And, as I do hope is clear, we can (and will) help!
1. Consider an extra mortgage payment.
The extra interest you pay will be added to this year’s mortgage interest by your lender, boosting your itemized deductions.
2. Pay your property taxes right now (not next year).
Real estate taxes are tax deductible. If your property tax bill is due in early 2016, you might want to pay it now and take the deduction.
3. Donate to charity–it’s ok to do good and save at the same time.
It pays to be charitable, especially at the end of the year. Donating cash is always a good idea. You can also donate household goods, clothing, and other items. Under the Pension Protection Act, you will need a written receipt for all charitable donations, and donated items must be in good or better condition. You can also deduct the cost of driving for charity at 14 cents per mile. You cannot take a deduction, however, for the value of your time or services when volunteering.
4. Take care of those medical bills.
Pay doctors, insurance premiums, buy eyeglasses, or stock up on prescription medications. You can take a deduction for medical expenses exceeding 10% of your adjusted gross income.
FOR BUSINESS OWNERS:
5. Boost business expenses.
Business owners and independent contractors can buy office supplies, invest in new equipment, or pay bonuses to their employees. They should also review their retirement plans or decide about setting up a retirement plan. Many retirement plans need to be established by the end of the year if owners want to make tax-deductible contributions for 2015.
6. Get Your Papers In Order NOW.
Good record-keeping can really pay off at tax time. Not only will it make your tax preparation easier and faster, but you might uncover enough tax deductions to be able to itemize. More importantly, the IRS will require receipts and other records in the event of an audit. Plus, it helps us out A LOT.
7. Sell losing investments to offset capital gains.
Investors can lower their capital gains taxes by selling securities that have lost money. Losses offset gains dollar for dollar, and losses in excess of your gains can be deducted, up to a certain amount per year.
8. Wait to invest until after the ex-dividend date.
Avoid buying mutual funds held in taxable accounts until after their ex-dividend date. You’ll avoid paying capital gains tax on the dividend.
9. Max out your retirement savings.
Contributions to a retirement plan reduce your taxable income.
ADVANCED TAX STRATEGIES:
10. Make the most of your Flexible Spending Account.
You should use up any funds in your Flexible Spending Accounts, or risk losing that money forever. Use your FSA funds to buy eyeglasses, medications, or get a checkup.
11. Avoid the gift tax by giving $14,000 or less per year per person.
Gifts over that amount will reduce your lifetime gift tax exclusion, and gifts over the exclusion will be taxed to the giver. (Giving is a tax strategy used by taxpayers who are facing a potential estate tax bill and need to remove assets from their taxable estate).
We thrive based on your referrals, and are truly grateful for them. Thanks again.
Lillian’s Professional Services