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 income ($1,500 if married filing separately) annually.
Prepay State Tax
Taxpayers who itemize on their federal returns generally may 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 2015. Or have more 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 so please talk with your Lopata advisor to develop the best strategy to meet your individual tax needs.
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. (Additional plan limits may apply.)
Fund a Health Savings Account
Individuals covered by a high-deductible health plan and who meet other eligibility requirements 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, plus an additional $1,000 for those 50 and older. Contributions can be made until the due date (without extensions).
