As the end of 2015 approaches I would like to share just a few tax ideas for you to consider. It is always a wise to review your financial situation so you can LOWER your tax liability and INCREASE your refund.
You should always make sure your withholding payments and estimates are sufficient because even though you have until April 15 to make your last payment you might still be hit with underpayment penalties.
Here are some ideas:
Offset Capital Gains with Capital Losses. The market has been good for most of the year for most people. You might have capital gains you want to capture. The tax rates for capital gains are lower than for ordinary income. So, take advantage of this. In fact, if you can offset your capital gains with losses in your portfolio (watch out for “wash” transactions) you might in fact pay NOTHING on your capital gains. If you have a way to lower your income (including the capital gain) to the 15% bracket, you would pay NOTHING on the capital gain tax. That would beat even Warren Buffett’s tax bracket!
Increase Charitable Deductions. If you follow this blog, you know that we advocate starting a private foundation. But, even if you don’t have a foundation that you control, there are tremendous advantages for increasing your charitable deductions (cash or non-cash). The government seems to be trying to find ways to “cap” just about every deduction we have, but charitable donations are not one of them. You can still deduct 100% of your donation up to 50% of your adjusted gross income.
Maximize Your Retirement Deduction. This is a huge NO-BRAINER. Pay yourself and take a big tax deduction. Most programs will match up to 4% of your salary also. Where else can you get this kind of return on your money without even earning a penny on your investments? The deduction has been increased to $18,000 for 401-K plans with a $6,000 catch-up contribution if you are 50 year of age or older. This is a bargain. Just do it.
Maximize Your HSA. A “Health Savings Account” is just about the greatest idea since sliced bread. If you have a high deductible health insurance plan (is there anyone out there who doesn’t) you can contribute income tax free AND FICA tax free $6,650 ($3,350 if you are single) to this program. That’s a savings of $1,500 even if you are in the 15% tax bracket. And the best part is that you get the deduction whether or not you spend the money! These accounts are completely portable. They can be inherited. They are so much better than the old FSA’s (use it or lose it). If you are still trying to deduct medical expenses by itemizing (and getting over that 10% AGI hurdle) I feel sorry for you. Get one of these and MAX it out!
Get Mileage Reimbursements. The IRS is giving 57.5 cents per mile in 2015. Wow! I realize most people commute to one job and are not eligible for mileage deductions or reimbursements. But maybe you are one of those people that have two or more jobs. Or maybe your job requires you to travel from office to office. If so, take some time and document those unreimbursed miles that you have driven on the job. Just 10,000 miles is going to give you a $5,750 deduction.
These are just a few ideas. As always contact The Eldridge Group for any year-end tax planning that is needed. But don’t wait very long! The end of the year is almost here.