Does "last minute planning" sound like an oxymoron to you? You may change your mind as you consider these timely ways to save taxes in 2016.
- Catch up on your retirement plan contributions to defer income taxes.
The annual maximum 401(k) contribution for 2015 is $18,000, plus another $6,000 if you're age 50 or more. The maximum IRA contribution is $5,500 ($6,500 if you're age 50 or more).
- Use your capital gains and losses effectively.
In a year of stock market volatility, you might find yourself with both winners and losers in your portfolio. Consider offsetting capital gains by selling securities that have lost value since the purchase date. Capital losses offer two benefits:
- You can lower your capital gains tax, including the new 3.8% Medicare surtax,
- You can use as much as $3,000 in losses to offset regular income.
- Pair appreciated stock and unfulfilled charitable obligations.
You can donate appreciated stock to your favorite charity and avoid capital gains altogether while receiving a tax deduction equal to the market value of the security.
- Evaluate business equipment needs.
Consider asset purchases that will qualify for Section 179 expensing rules. Keep in mind that equipment must be placed in service prior to year-end to qualify.
Before you take any last-minute steps to save taxes, it's important to know where you stand. An assessment of your situation will tell if your tax withholdings or estimated payments are on track. For a thorough review, give our office a call.