As the end of the year gets closer, unfortunately it’s time to think about taxes and make some moves.
The tax season may seem far off, 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 in the springtime:
Contributing to charity is a great way to help others with a gift and yourself with a tax deduction. 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 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.
Pre-tax contributions to a retirement accounts, such as a 401(k) or 403(b), could reduce 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 set aside money in a traditional IRA or a Simplified Employee Pension IRA, you can also get tax breaks and 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 is less.
You can also think about 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 wipe out 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 Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat and find out how we can help reduce your 2016 tax burden.
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Source: USA Today