Tax Season is now upon us. By now you should start receiving tax documents in the mail and at least thinking about the preparation of your income tax return. With taxes on the brain, it is a good time to look at three quick ways to save on your taxes in 2015.
1: Get To Know Your IRA
The Individual Retirement Account is a great tool to use to save on taxes and you also get the benefit of investing in your future. For both 2014 and 2015, you can contribute up to $5,500 ($11,000 per couple) and that contribution is deductible, which will reduce your tax bill. There are limits to the deduction if your modified adjusted gross income is above a certain level and if you have the ability to participate in a retirement savings plan at your workplace. The great part about the IRA deduction is that you can make a contribution to your IRA account until April 15, 2015 and have it count as a deduction on your 2014 taxes. That means you can still make deductions to the 2014 tax year right now! If your adjusted gross income is below $30,000 if you are single or $60,000 if you are married filing jointly, by making the IRA contribution, you will also be able to qualify for the qualified retirement savings credit. Since the IRA contribution is above the line deduction, you can make your contribution and also lower your AGI to give you a greater credit.
2: Take your losses and run
If you have an investment portfolio, you can sell assets at a loss to generate capital losses. You can have up to $3,000 in capital losses in excess of capital gains to reduce your income. When you sell the asset at a loss, you can rebuy the same asset 30 days after the sale or a similar asset right away. This allows you to lock in a lower basis on the investment when the asset is undervalued. It is very important that you wait at least 30 days to buy the same asset you sold, otherwise the IRS will consider it a wash sale and they will disallow the loss. Also, if you have stock that you held that is deemed worthless, you can elect to treat the stock as worthless on your tax return and take the capital loss, without having to sell the stock for $0 in order to do so.
3: The more the merrier
Another great way to help you save on 2015’s taxes is by bunching your charitable contributions. Let’s say every January you give a large charitable donation to a charity. You have already made your January 2015 donation. If you wanted to save on your taxes in 2015, you could accelerate your January 2016 donation to December 2015. That would mean you would have double the deductions in 2015. This may be particularly important if you are expecting a one-time bump in income for 2015 as it would allow you to soften the increased income with the increased deductions.
These are just three quick ways to save on your taxes in 2015 and there are other ways to save on your taxes based on your own facts and circumstances. Please reach out to me and let me know if I can assist you in planning and preparing your tax returns.