Year-end Tax Moves
Before 2015 comes to a close, take the time to consider potential year-end tax planning strategies, such as those discussed below.
Capital Gains and Losses
Assess your capital gains situation for the year and use the "netting" rules to minimize your taxes. If you have capital gains for the year, you can use capital losses to offset those capital gains, plus an additional $3,000 of ordinary im:oI1w ($1,500 if married filing separately) annually. Moreover, you may carlJ' forward unused capital losses to future tax years, subject to the same restrictions.
Prepay State Tax
Taxpayers who itemize on their federal returns may generally deduct any state income taxes paid during 2015. However, because the fourth estimated payment is generally not due until January, payment on the due date renders the deduction unavailable until the year it is paid. Instead, consider paying your fourth quarter payment by the end of December to increase your deduction for 201 5. Or have Illore state income tax withheld from your pay before year-end if you expect to owe tax when you file your return. Note that these strategies aren't beneficial to taxpayers subject to the alternative minimum tax.
Contribute More to Tax-favored Retirement Accounts
Employees enrolled in retirement savings plans who haven't reached their plan's contribution limit may want to increase their pretax contributions prior to year-end. Doing so would decrease their taxable income. For 2015, the IRS dollar limit on elective deferrals to 401(k), 403(b), and most 457 plans is $18,000, plus an additional $6,000 for those 50 and older. (AddiLional plan limiLs may apply.)
Fund a Health Savings Account
Individuals covered by a high-deductible health plan and who meet other eligibility requiremenLs may make deductible contributions to their health savings accounts. Generally, for 2015, the limits are $3,350 for self-only coverage and $6,650 for family coverage. Contributions can be made until the account holder's tax return due date (without extensions).
Take Required Distributions
Generally, individuals age 70 1/2 or older who have IRAs or retirement plan accounts must take their required minimum distributions (RMDs) before the end of the calendar year. Failure to do so may result in a 50% penalty on withdrawals not taken.
Taxpayers who turn 70 1/2 in 2015 may wait until April 1, 2016, to take their first RMD. However, because a second RMD would have Lo be taken before the end of 2016, you may wish to take your first RMD this year if it will help you avoid a higher marginal tax rate in 2016 .
New Filing Deadlines
Tile federal legislation to extcnd the Highway Trust Fund, enacted in .July, includes several significant tax provisions. Among them: changes to the filing deadlines for the federal income-tax returns of partnerships and C corporations. These new rules generally will be effective for tax years beginning after December 31, 2015.*
Partnerships - Tax returns mllst be filed by the fifteenth clay of the third month following the end of the tax year (by March 15) for a calendar-year partnership) .
C corporations - Tax returns will be due on the fifteenth day of the fourth month afterthe' end of the tax year (by April 15 for a calendar-year corporation) .
Additionally, the new law increases the extension periods available to partnerships, trusts, employee benefit plans, and tax-exempt organizations.
* The filing deadline change for a C corporation with a June 30 fiscal year-end won't apply until tax years beginning after December 31, 2025.
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