Regardless of your financial situation, if you know that you will need to file taxes for 2015 it is a good idea to start planning ahead during that tax year. Most financial planners will recommend year round tax management, however, if you have not done so, it is not too late to take action before the end of the year.
The month of December is a time where you can assess your tax situation and take steps to ensure that you do not pay more tax than necessary when you file, including:
- Looking for losses in your investments and selling.
Even if you don’t quite consider yourself an investment shark, you can benefit from “tax loss harvesting”. This is where you review your investments, such as mutual funds and stocks, to see if there are any which would incur a loss if you were to sell them now. You can then deduct this loss dollar for dollar offset your income or other taxable gains. The investments can be re-purchased after 30 days. Use this strategy carefully and with the help of a tax professional, and you can save a lot in taxes.
- Contributing to charities.
Make a financial contribution, donate clothing or household items, or make other charitable contributions to an IRS qualified charity, and you can deduct the fair market value on your tax return. Only contributions over $250 require a bank record or communication from the charity, but it is a good idea to save all receipts.
- Deferring your income.
You only pay for income in the year that it was received. If you are a salaried employee and you will receive a bonus for the year, find out if you can defer receiving that bonus until early 2016. If you are a business owner or otherwise self-employed, consider delaying billings until late December so that they are received in January. You can still deduct the costs of running your business, but you will not need to claim your income until 2017.
- Investing in retirement plans.
401(k), 403(b), 457(b) plans are corporate and government plans where you contribute your income before it is taxed. You must contribute in the same tax year for which you are filing. Don’t ignore these plans if your employer offers them. Similar plans are available for the self-employed such as a Solo 401K, SEP IRA or a Keogh plan.Individuals or business owners can also contribute post-tax dollars to an IRA, although this does not need to be done by December 31. You have until April 15 of 2016 to receive the tax benefit of an IRA contribution.
Bonus #5: This is not a planning tip, but a reminder… Don’t forget that the cost of tax preparation is a tax deduction that you can claim. You can also deduct the cost of any tax related consultations, seminars, books, and so on.
Of course, everyone’s situation is unique, and there are numerous options available depending on any given situation. A qualified tax specialist or financial planner can help you to assess your situation and make the right decisions and moves to mitigate your tax liability.
Contact me G_hilliard@emergefinancial.com at to find out how I can help you to lower your tax bracket and save money when you file in 2016. Please also explore emergefinancial.com to learn more about the financial services that I offer and how I can help you to better ensure your financial future.
I am a financial advisor and investment guidance counselor with over 10 years of experience in providing professional and confidential financial services with integrity, care, and a personal attention to ensure that I meet all of my client’s financial needs.
I have a Bachelor of Arts degree from California State University, Hayward and I am a Certified Retirement Counselor with Series 7, 63, 65 designations. I am also a California Life Insurance Agent: #0E71420.
“Your future deserves a great plan.”
!!!Attention!!! Alameda County employees… Did you know I am your dedicated Deferred Compensation 457(b) plan participant financial consultant? That’s right. You have full access to my services, free of charge, year round! You can contact me through your department or the county treasurer’s office. You can also attend one of my county sponsored seminars to learn more, including:
- help and advice on gaining a better understanding of the benefits of your plan
- goal setting
- proper asset allocation techniques
- retirement distribution strategies
the integration of other retirement plans (where relevant)