Last Minute Tax Deductions
Posted by: Brookside Admin
As 2016 is coming to a close, tax season is slowly approaching. Some people might have even started planning what they plan to do with their tax return, while most are doing their best to keep taxes out of sight and out of mind for as long as possible. Whether you’re busy crafting a wish list or trying to pretend April 15th doesn’t exist, we have some great last-minute tax deductions you can still take advantage of.
Contribute to Your IRA
You can actually take advantage of this deduction right up until tax filing day. A contribution to your traditional IRA is typically considered tax-deductible. However, there is a limit of up to $5,500 in 2016. The IRS also has a few other rules regarding tax-deductible IRA contributions, but most contributions will be eligible as long as you or your spouse aren’t covered by a company retirement plan.
Basic tax strategy says, the less money you make this year, the less you’ll have to pay taxes on this year. So if you know you’re due for a big end of year bonus at work, you might consider asking your employer to defer the payment until next year. This will only delay the inevitable, but if 2016 is already shaping up to be an expensive tax year, it might be wise to bump that tax increase until next year.
The IRS allows a little wiggle room if you’ve lost money on a capital investment, such as a stock. In order to take advantage of this deduction, you’ll have to sell the stock at a lower price than you paid for it. This process is called realizing the loss. Once the stock is sold you can claim a capital loss. According to IRS rules, if you have lost more money than you gained you’re allowed to use up to $3,000 of those losses to offset taxable income.
A word of warning, if you go and buy back the stock you sold at a loss, or buy similar stock, within 30 days before or after taking the loss, the IRS will consider this a wash sale. If the IRS discovers you did a wash sale, they will disallow the deduction.
This one only applies to business owners, and it’s a great one for business owners to know. The end of the year is a great time to leverage expenses in order to get tax breaks. If you know you spend $1,000 on office supplies, go ahead and stock up in December. Spend $3,000 now and then don’t worry about office supplies for the first quarter. You can also hand out some end of year bonuses to employees to increase claimed expenses.
These are just a few of the ways you can lower your tax bill for 2016. If you need help filing taxes or contact Brown, Kinion & CO.