While 2015 is almost over, there still are tax-saving strategies you can leverage this year personally and for your business. Act now, and make tax strategies a priority in 2016.
- Maximize Retirement Plan Contributions. Lower taxable income for 2015 through pre-tax contributions to a 401(k) or 403(b) plan up to $18,000. Self-employed individuals, with a simplified employee pension plan, can contribute 25 percent of their compensation, up to $53,000, in 2015.
- Investments and Tax Loss Potential. Consider offsetting realized gains by selling appropriate loss position investments.
- Group and Maximize Deductions. Grouping tax deductions such as mortgage interest payments in one year can maximize their value. Mortgage interest payments, out-of-pocket medical expenses and elective surgeries meeting IRS requirements are examples.
- Be Charitable. Contribute to charities, and keep clear records. For Arizona taxes, some donations can qualify for a tax credit, making them more valuable than a deduction.
- Life-changing Events. Retirement, marriage, divorce, a new baby and death of a spouse are examples of life-changing events affecting your taxes. Planning may be as simple as changing your withholding, but you should address major changes.
- Have a Gift Strategy. Individuals can make tax-free gifts of up to $14,000 a year to each recipient, with no limit on the number of people. The gift tax exclusion is an effective way to distribute property as a part of estate planning and to reduce exposure to inheritance taxes.
- Use Bad Debts. Identify whether your business has any uncollectible debts. They may provide a tax deduction.
- Health Insurance. The tax penalty due for not dealing with the coverage mandate of the Affordable Care Act is increasing. With few exceptions, enrollment for coverage through the Health Insurance Marketplace is closed, but you may be able to purchase insurance on the open market.
- Get Organized and Get Help. Get all your documents in order, and meet with your CPA. If you don’t have a CPA, get one.
- Start Now for 2016. Start planning now for 2016. Tax awareness should not stop at year-end, or when you file. Make reducing your taxes a priority in 2016.
George Krauja and Paul Bancroft are attorneys with Fennemore Craig in Tucson. Krauja is an attorney and a CPA and Bancroft focuses his practice in state and local taxation. Reach Krauja at email@example.com. Reach Bancroft at firstname.lastname@example.org.