Even though the end of the year is fast approaching, you still have time to trim your 2015 federal income tax bill. Here are several suggestions:
State and local income taxes. If you prepay certain state and local taxes, you can claim the deduction on your 2015 return. Caution: Analyze your exposure to the alternative minimum tax before accelerating these deductions.
Charitable donations. When you itemize, you can generally deduct the full amount of charitable donations you make by December 31, 2015, including those you put on your credit card and pay in 2016.
Capital gains. Consider selling appreciated investments if the gain on the sale will be absorbed by prior losses, or if you will benefit from the preferential long-term capital gain tax rate available when you own assets for more than a year.
Capital losses. By “harvesting” capital losses from depreciated securities at year-end, you can offset other capital gains plus up to $3,000 of ordinary income.
Required minimum distributions. Verify that you have withdrawn the right amount from your qualified plans and IRAs to avoid a 50% tax penalty.
Dependency exemptions. Review how much support you provided to dependents in 2015. Generally, you can claim a dependency exemption for a qualifying relative if you provide more than half of the financial support for the year.
Medical expenses. When you itemize, you can claim deductions for unreimbursed medical expenses that exceed 10% of your adjusted gross income. Move elective medical and dental procedures, such as routine exams, into 2015 if those expenses will help you clear the 10% threshold.
Higher education credits. If you pay your child’s tuition bill for the next semester, the cost generally qualifies for a federal income tax credit in 2015.
Estimated taxes. Avoid an underpayment penalty by paying at least 90% of your 2015 tax liability or 100% of last year’s liability (110% if your adjusted gross income exceeded $150,000).
Want to learn more ways to save on your 2015 income taxes? Give us a call at 419.629.3494 today!