8 Easy Ways To Cut Your Taxes Now

By Gail MarksJarvis
Chicago Tribune.

Right now you’re probably thinking more about Santa Claus than Uncle Sam.

But a little attention to Uncle Sam between now and the end of the year may make his visit less painful when you do your tax return in a few months. Consider some relatively simple moves now so you can maneuver through your 2015 return with options to keep your taxes down.

Dump the extras: Whether you have clothes, cars or household items like furniture you no longer want, deliver them to charity so you can get a deduction. Just make sure it’s a recognized charitable organization. Provide the organization a list, including value, of each item and keep a copy along with a receipt.

Be kind to your future: Everyone knows they should prepare for retirement, but most people save far less than they should. So get on top of this now, and save taxes while doing the right thing for your future. Consider your 401(k) retirement savings plan, or start or fund an IRA away from work. Say you are in the 25 percent tax bracket and put $1,000 into your 401(k) before the end of the year. You will only be taking $750 out of your pocket because you will be saving $250 on taxes. You can put up to $18,000 in a 401(k) if under 50 and $24,000 if 50 or older. The maximum for an IRA is $5,500 if under 50 or $6,500 if 50 or older. You have until April 15 to make deposits in IRAs. For a tax deduction, use an IRA, not a Roth IRA.

Home sweet home: If you pay your January 2016 mortgage payment before the end of this year, you will be able to deduct the interest in 2015. Likewise, if you have property tax due right after the start of the new year, pay it now and deduct that in 2015 too.

Save on college: If you are in college or have children in college, you can claim the American Opportunity Tax Credit on as much as $2,500 per student. So if you haven’t spent that much this year but have payments coming due early in 2016 for tuition, fees and course-related expenses, pay now. Even computers can qualify. This is a “refundable” credit, meaning: If you claim it and it wipes out your taxes completely, you can still get a benefit, a refund of up to 40 percent.

The credit is available for undergraduates for four years. If you’ve exceeded that, or are in graduate school, or taking courses to enhance your work skills, pay in 2015 for the Lifetime Learning Credit. See the IRS site.

Go to the doctor: There are several types of “miscellaneous” deductions possible, and perhaps the most popular is for medical expenses. The trouble is, your medical expenses must be more than 10 percent of your adjusted gross income, or 7.5 percent for seniors. You can add more before the end of 2015. Consider lab tests, dental work, glasses, medicine, hearing aids, or even surgeries you are planning. Meanwhile, if you have a flexible spending account at work that needs to be used up before the end of the year, make sure you do it.

Give to charity: The most effective way to give is to contribute an asset like a stock, bond or mutual fund shares directly to the charity, which doesn’t have to pay taxes. So once it has your asset, the charitable organization will sell it and get the full benefit of your donation. If you sold it instead, you’d have to pay taxes and would have less to give away.

Make poor investments count: This has been a year of big losses in the stock market. If you want to get rid of a losing stock or fund, and have also sold winners, you can use the losses on the stinkers to keep your taxes down on the winners. Remember, however, this doesn’t apply to 401(k)s or IRAs, and the loss is tallied from the time you bought the investment, not just a loss in a single year. If you offset your gains and have leftover losses, the IRS allows you to use $3,000 to offset other income. If there are still leftover losses, you can carry them over to future years.

Delay income: If you have a regular job, this is easier said than done. But if you can control when you get income, you can control the tax bill, to some extent. If, for example, you have a bonus coming, or can delay some pay for a couple of weeks, arrange to get it in January rather than 2015. If you have a small business and are just completing some work for a client, bill the client at the end of December so you get paid in 2016. But beware. If you think you are going to make more money next year than this year _ you may want to get paid now rather than waiting.
Gail MarksJarvis is a personal finance columnist for the Chicago Tribune and author of “Saving for Retirement Without Living Like a Pauper or Winning the Lottery.”

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