As 2015 winds down, there are a few things that taxpayers can do to reduce their tax liability for the year.
Charitable Contributions: Now is the time of year that many of your favorite charities are looking for a contribution to help them finish the year well. Cash, appreciated stock and vehicles all make great gifts. And don’t forget to clean out those closets and bring those old clothes to Goodwill or Salvation Army so they can enjoy another life.
Applicability: Taxpayers who itemize their deductions and don’t get hit hard by AMT.
Limits: Can be limited depending on the size of the contributions, your AGI and the impact of the Alternative Minimum Tax.
Timeframe: Checks must be written in 2015, in-kind gifts must be given in 2015.
401k Contributions: If you haven’t maxed out your 401k contribution for the year, go see the HR department now and make that change. Many companies give year-end bonuses to their employees. Consider putting that amount directly into your 401k.
Applicability: Employees with a 401k.
Limits: Up to $18,000 if under 50. Up to $24,000 if 50 plus.
Timeframe: Contributions must be made by year end.
HSA Contributions: I like to describe these accounts as “a retirement account that I can use for medical expenses.” That’s because one of the little known benefits of an HAS is that they function like an IRA when you reach retirement age. Knowing this will allow you to be a more informed consumer of healthcare services.
Applicability: Must be enrolled in an HSA-qualified high-deductible health plan.
Limits: Up to $3350 for an individual and up to $6650 for a family.
Timeframe: You have until April 15, 2016 to make the contribution making this a powerful planning tool.
Traditional IRA Contributions: Save money for retirement and receive a tax break now? Sounds great! While there are sound arguments for investing in a ROTH IRA, it is still advantageous for many taxpayers to use a traditional IRA. The contribution amounts are deducted on the first page of your 1040, thereby reducing your adjusted gross income.
Applicability: Taxpayers with earned income. Maximum contribution of $5500 if under 50. Maximum of $6500 if 50 plus. Contribution limits apply to the total of Traditional and ROTH IRA contributions for the year.
Limits: Deductibility may be limited depending on your AGI.
Timeframe: You have until April 15, 2016 to make the contribution making this a powerful planning tool.
