Tax Moves to Make Before New Year

As the end of the year gets closer, it’s unfortunately the time to think about taxes and make some smart moves.

The tax season may seem far away, but this is the time of year to get the ball rolling. Let’s look at some easy steps to take that could help you next Spring:

Deduct

Contributing to charity is a perfect way to help others with a gift and yourself with a tax deduction. But remember to keep any receipts or paperwork to back up your donation.

However, charitable contributions will only help your taxes if you are itemizing in your taxes and those deductions exceed the standard deduction. The standard deduction for 2016 is $6,300 for a single taxpayer. $9,300 is for head of household and $12,600 for a married couple filing jointly or a surviving spouse.

Charitable deductions are limited up to 50 percent of your adjusted gross income.

moves

Now is the time to plan ahead for the 2016 tax season.

Save

Pre-tax contributions to a retirement accounts, such as a 401(k) or 403(b), could also lower the taxes you owe. You have until Dec. 30 to increase the amount you set aside in such accounts.

The maximum you can contribute to a 401(k) for 2016 is $18,000, unless you are age 50 or older, which allows you to contribute up to $24,000.

If you want to put money in a traditional IRA or a Simplified Employee Pension IRA, you can also get tax breaks. You have until April 15 of next year to do so and apply it to your 2016 taxes.

The maximum IRA contribution for this year is $5,500 for taxpayers under 50 and $6,500 for those 50 and older. SEP contributions by the self-employed are limited to $53,000 or 25 percent of eligible income, whichever one turns out to be less.

Sell

You can also consider selling investments such as stocks, bonds and mutual funds to realize losses. You can then use those losses to offset any gains you may have realized during the year.

If your losses are more than your gains, you can apply up to $3,000 of the excess loss to erase other income. If your losses are more than $3,000, you can carry further losses over into subsequent years. But this needs to be done by Dec. 30 because it is the last business day of the year.

Call Scott A. Kunkel, CPA PC today in North Richland Hills at 817-498-1040 to have a chat and find out how we can help reduce your 2016 tax burden.

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Source: USA Today

Scott A. Kunkel, CPA, PC

7801 Mid-Cities Blvd. Suite 400
North Richland Hills, TX 76182

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