By Nathan Vinson
Attorney, English, Lucas, Priest and Owsley, LLP
That means if there are financial moves you intended to make this year to save on your 2015 tax bill, you need to get going. I’ve outlined here a brief checklist to get you started.
- Make your 2015 retirement account contributions. Contributing to a traditional IRA lowers your tax bill, so if you intend to do that, get that deposit made soon if you’re not in retirement yet. You can contribute up to $18,000 annually to a 401(k) or 403(b), or up to $24,000 annually if you’re 50 or older.
- Charitable contributions need to be made by December 31 to count for the 2015 tax year. Why wait? Write that check now. If it’s sizable, it may take some time to get and process, particularly if you’re pulling it from investment accounts. You may also want to review any pledges you made to your church or other organizations and pay those pledge commitments.
- Cash gifts (e.g. to children or other close ones) are allowed each calendar year up to a certain limit per person without the requirement of reporting to the IRS. If, for example, you regularly give your children a chunk of change, go ahead and do that. You’re allowed to gift $14,000 each year to each person without filing a gift tax return.
- Max out that flexible spending account. If you pay for child care or health care expenses through a pre-tax flexible spending account, try to put it all to good use this year, rather than later. Money left in that account may not be available for use at all, or will be available for very limited uses. This year, employers are allowed to let employees carry over $500 in those accounts to calendar year 2016, but it’s dependent on your employer to extend that generosity. Err on the side of caution and try to zero it out this year.
- Take your required distributions from IRAs if required. If you are past the age of 70 1/2, remember, you’re required to take a minimum distribution from your IRA this year or pay a penalty. Although you do have until April 1 to take this year’s distribution, go ahead and get it done.
- Check your capital gains or losses. It’s been a bit of a wild year in the markets. If you have losses to carryover from prior years, it may be a good time to cash in any investments this year that will produce fairly substantial taxable gains. Those losses may shield the gains in part or in full from taxes.
This time of year is incredibly hectic, but once it has passed, there is no turning back, and the tax laws generally do not allow do-overs. The things you do (or don’t do) before the New Year arrives matter immensely when tax time rolls around. Do not put off the financial moves needed to lower your tax burden.
I regularly advise clients on tax matters. If I can help you, please contact me, Nathan Vinson, at email@example.com or (270) 781-6500.