With 2015 in the books, many Americans are looking at their tax bills and scratching their heads. Did I overpay this year? If so, how can I avoid this situation next year?
Luckily, there are a number of simple steps you can take this year to avoid feeling the same way next year. In this post, we’ll explore some options that may be worth consideration. (Keep in mind that before taking any action, it is always best to seek proper professional advice from a CPA. Click here for a free consultation.)
Consider Possible Deductions
Property owners have a couple of options for extra tax deductions. If you have a mortgage, you may want to consider making an extra mortgage payment. The additional interest you’ll pay will be added to the current year’s mortgage interest by your lender. This means you’ll see a boost in your itemized deductions when you file your taxes.
Taking another example, say, you own a small business with limited transportation needs, so rather than buying a new vehicle for the business, you use your private vehicle. In such a case, you might qualify for a tax deduction on the mileage (visit https://mileiq.com/blog-en-us/write-off-vehicle-expenses-taxes for more information) on the vehicle used for business purposes.
Donating money, household goods, clothing, or other items to charity can also earn you a tax deduction. Be sure to get written receipts for all charitable donations. It’s also important to note that medical bills which exceed 10% of your adjusted gross income can qualify you for a tax deduction. If you have any funds in your Flexible Spending Account, be sure to spend that money or risk losing it. You can use these funds to purchase medications, eyeglasses, or simply get a checkup.
Deductions for Business Owners
Many business owners wait until the fourth quarter to incur incremental expenses. This makes wise business sense, but it also makes good tax sense. For example, as the end of the year approaches, it might be a good time for business owners to invest in new business equipment, purchase office supplies and cheap office furniture, and provide employees with bonuses. Review retirement plans and consider setting up a plan if you don’t already have one. Max out your retirement savings; contributing to your retirement plan can reduce your taxable income. Of course, any of these ideas can be implemented before the end of 2016; however, many business owners prefer to wait until Q4 as to ensure profitability meets or exceeds the plan.
As an investor, selling losing investments can help you offset capital gains taxes. Losses will offset gains at a dollar for dollar ratio. Losses that exceed your gains can be deducted up to a specific amount each year. When making new investments, wait to invest until after the ex-dividend date. By not purchasing mutual funds held in taxable accounts until after the ex-dividend date, you can avoid paying capital gains tax on the dividend.
If you’re facing a potential estate tax bill, it may make sense to remove assets from your taxable estate by making gifts. By giving $14,000 or less per year per person, you can avoid the gift tax.
Have a Plan for 2016
Now is the time to get a plan together for 2016’s deductions. Don’t wait until December 31st and scramble to get everything in order.
If you have questions about filing your taxes or deductions that you may be eligible for, contact the tax team at Baker Retirement & Wealth Management, PC. Our tax experts assist both individuals and businesses with tax questions as well as tax preparation. Our team has been providing tax advice in the greater Evansville area for nearly thirty years.
Stop by our office in Evansville, Owensville, Newburgh, or Boonville, or simply give us a call toll free at 1-866-244-3517.Talk to a CPA in Evansville
Advisory Services offered through Vanderbilt Advisory Services
Clearing agent: Fidelity Clearing & Custody Solutions
Insurance Services offered through Vanderbilt Insurance and other agencies
Supervising Office: 125 Froehlich Farm Blvd, Woodbury, NY 11797 • 631-845-5100
For additional information on services, disclosures, fees, and conflicts of interest, please visit www.vanderbiltfg.com/disclosures