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If the mere thought of seeing the phrase “last minute tax tips” makes you break out in a cold sweat, this blog post is for you. Even though 2015 is in the rear-view mirror, there are still things that you can do to reduce your taxes and the stress of filing them. You may expect to file your taxes at the last minute (or later), but you can still take advantage of a number of money-saving tools.
Cushion Your Retirement Nest Egg
This one is a win-win: you can reduce your taxable income, and make your retirement a little more comfortable at the same time. If you qualify, you can still make some tax-deductible contributions to a traditional individual retirement account, better known as an IRA. If you’re 49 or younger, you can contribute a maximum of $5,500; if you’re 50 or older, that maximum rises to $6,500. You have up until April 18, 2016 to make these contributions, which are deductible on your 2015 income tax return. If you have the ability, go ahead and do it. Your future self will thank you.
Fatten Your Health Savings Account
It’s gotten more difficult to deduct medical expenses on your income tax return in recent years, but your medical expenses can still help you save on your income taxes. If you have a health savings account (HSA) from which you pay for qualified medical expenses, you can contribute to it and reduce your 2015 tax bill. The maximum contribution for individuals under 55 is $3,350 per individual or $6,650 per family. Those figures increase to $4,350 and $7,650 for taxpayers over 55. As with IRA contributions, the deadline for contributions to reduce 2015 taxable income is April 18, 2016.
Look at Your Year in Review
You’ve seen the clever tax preparer ads asking “Did you get married/buy a house/have a baby last year?” Big life changes can add up to some pretty respectable tax savings. Even a divorce can have a silver lining—any alimony you pay is tax-deductible to you (but taxable to the recipient). Some life changes you may not have considered that can have a beneficial impact on your tax bill are new dependents, such as an elderly parent who moved in with you; new education expenses; or new self-employment expenses.
Take Stock of Your Losses
If you own stock, and you sold off any money-losing stocks by the end of 2015, remember that you can write off those losses on your 2015 tax return. Sometimes referred to as “tax-loss harvesting,” these losses can be used to offset your 2015 income by up to $3,000.
Look Over Last Year’s Tax Return
After you filed last year’s taxes, you may never have wanted to look at your return again, but now is the time to pull it out. It can serve as a reminder of what you need help get your records together to file this year’s return, making the process a little less stressful. You may have forgotten about the many smaller deductible expenses that add up, such as your unreimbursed employee expenses like dues to professional organizations and continuing education.
Don’t Panic—It’s Easy to File For an Extension*
You can get a six-month extension to file your taxes fairly easily, with a phone call to the IRS or a visit to the IRS website. There’s just one catch you need to be aware of (hence the asterisk in the heading): an extension to file is NOT an extension to pay. If you don’t pay the amount you owe by April 15, the IRS will assess you a penalty and you’ll accrue interest on the amount you owe until it is paid in full.
Once your tax filing is done, you can give a sigh of relief, but don’t wait until last minute next year to minimize your 2016 income! Take a look at our article on year-end tax reduction tips before the end of 2016 in order to make April 15, 2017 a lot less stressful—and costly.