Now Is the Time to Think About Your Next Tax Return

The 2015 tax return is due by April 2016, but now is the time to consider tax planning options. Many of the tax cuts that can be made for the 2015 return must be implemented by the end of the year. Here are answers to questions about tax planning strategies in the coming weeks.

Do I need to consider investing by the end of the year?

It is important to understand tax considerations before moving. For example, many investors are worried about capital gains. One effective tax reduction strategy is to offset the capital gains realized in the portfolio with capital losses. If you have investment holdings that are less valuable than what you paid, you can consider selling those positions and realizing capital losses, especially as a way to offset capital gains. This strategy may be appropriate for taxpayers who have taxable capital gains.

Please note that if you are within the 10% or 15% tax rate, you will be subject to a 0% federal tax rate for long-term capital gains and eligible dividends, and significant tax savings. In this case, capital loss “harvesting” is not a useful strategy. Before selling an asset, make sure that the movement is consistent with your long-term investment strategy. Note that one of the biggest tax benefits is maintaining unrealized capital gains. Profits are taxed only when the investment is sold.

What is the tax impact of the investments I own or consider?

In general, there are many tax implications for investments. Let's take a closer look at mutual funds. Because mutual funds are subject to distributions made by taxable funds, there are various tax considerations. Even if the fund itself has a negative return for the year, the position of the fund you own can pay a large distribution by the end of the year. Check the potential distribution status of the funds you own. Please note that this tax treatment does not apply to funds held in tax deferred vehicles such as 401 [k] and IRA.

Are there any measures I can take to reduce taxes on income?

If you have the ability to manage your income, you can pay attention to whether you are approaching the threshold point where your income level moves to a higher tax system. For example, a couple who makes a joint return in 2015 whose taxable income exceeds $ 74,900 [after deduction and personal exemption] is included in the 25% tax system. This does not mean that all income is subject to a 25% tax rate because income is taxed in stages [all less than $ 74,900 are taxed at a rate of 15% or less]. However, when the 25% tax rate is reached, the net long-term capital gains realized will be subject to 15% tax at the federal level.

By keeping their income [including all profits] below $ 74,900, the couple stays 15% tax and qualifies for a long-term capital gains tax rate of 0%. Finding ways to keep your income below a threshold can be important for people of different income levels for a variety of reasons.

Is there a way to reduce taxes by increasing my savings until retirement?

Pre-tax contributions to the workplace savings plan or tax deductible contributions to the IRA [if eligible based on income] can reduce taxable income in 2015. If you are eligible, you should consider donating to Roth IRA The possibility of creating a source of tax-free income for retirement. Roth donations cannot be deducted from current taxes, but donations are important because donations are limited. In 2015, you can donate up to $ 5,500 to IRA [$ 6,500 if you are over 50]. By 15 April 2016, you need to contribute to IRA in 2015.

When should I make a charitable donation?

Your favorite charity will prefer to make a gift as soon as possible. To request a deduction on the 2015 tax return, you must make a donation by December 31, 2015. To claim a charitable deduction, itemize the deduction and a bank statement or receipt from a charity.

It is important to note that the information provided in this article is a general source of information and is not intended to be the primary basis for investment decisions. It should not be interpreted as advice designed to meet the needs of individual investors. For financial concerns, seek financial advisor advice. You should also consult with your tax advisor or attorney on specific tax matters before making decisions that may affect your 2015 tax return.