Accurate Advice Newsletter – December 2015

6 Year End Tax Tips

Things that need to be done before December 31, 2015 to take advantage of them on your 2015 taxes.

1. Charitable Donations

If you itemize your deductions on your personal tax return, charitable donations are a great way to boost your deduction. Charitable donations can be cash or  items donated to charity, just make sure to get receipts. Just be sure that if you are donating items to keep a record or list of what items were donated and their condition so we can estimate the value of the donation. One great tip if you are not good at making lists or you are in a hurry, snap some pictures of the items as a visual record, this way we can at least account for the items included in the picture. As long as the charitable donation is made by December 31st, 2015 it can go on your 2015 tax return.

2. Medical Expenses

If your medical expenses exceed 10% of your income, you can claim anything exceeding 10% of your income as a medical deduction. If you regularly itemize your taxes and you already have enough medical expenses to add to your itemized deductions, it may be beneficial to pay those last few outstanding medical bills, pick up that prescription that was due to be fill just after the 1st of the year, or even replace your prescription glasses before the year ends, as any medical expenses paid in 2015 will be included on your 2015 tax return. Especially if 2015’s high medical expenses are not going to continue into the next year when you may not be able to claim a medical deduction because your medical expenses don’t exceed 10% of your income.

3. Sell Losing Investments to Offset Gains

If you had some gains on investments earlier in the year, now is a great time to get rid of those stocks just seem to keep losing money. By cutting your losses you can offset some of those gains from earlier in the year. It must be done by December 31st, 2015 or it will go on your 2016 taxes.

4. Make Contributions to your Retirement Account

You have until April 15, 2016 to make a 2015 contribution to your IRA, but if you have a 401k through work you need to contribute before the end of the year to count towards 2015 totals.

5. Check IRA distributions On traditional IRA accounts

If you reached 70 1/2 years of age during 2015 you are required to take a minimum distribution from that retirement account. You can figure out your required minimum distribution by using the worksheet on this page at IRS.gov. The required amount needs to be taken out by December 31, 2015, if you fail to take required distributions you can be penalized 50% tax on the amount you should have taken.

6. Check your Flexible Spending Accounts

If you have a flexible spending plan through work, you may want to check if the amount left in it can be carried forward to the next year. Some of these plans are use-it-or-lose-it and the funds need to be used by years end or only a certain amount is eligible to carry-forward to the next year. The rules can vary depending on the type of account. If you have excess in a medical spending account you may want to schedule doctors appointments and other necessary medical expenses before the end of the year to use that balance that may not carry-forward.

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Open Enrollment for Health Insurance on Healthcare.gov until December 15, 2015

Whether you are currently covered by health insurance or you have no coverage it may be beneficial to check out the the health insurance marketplace at http://healthcare.gov . If your household income level is below 400% of the federal poverty level you may qualify for the health insurance Premium Tax Credit which will cover a portion of your health insurance costs. The only way to get this credit is to sign up for health insurance from the online marketplace. If your income falls below 133% of the federal poverty level you may be eligible for your state sponsored Medicaid plan. Also if you weren’t covered in 2015 by health insurance it may be too late to avoid the personal responsibility tax penalty on your 2015 tax return, but you may want to sign up for coverage starting next year. The penalties get steeper each year for not being covered and max out for tax year 2016. The penalties are as follows for 2015 and 2016:

The fee for not having coverage in 2015

The penalty is the lesser of:

A. Monthly Penalty Amount which is defined as:
The greater of 1/12th:

1. The sum of the penalties, $325 per adult ($162.50 per child) x the number of months there was no health insurance

or

2. 2% of total taxable income for 2015 x the number of months there was no health insurance.

OR

B. The total cost of the national average bronze plan coverage ($207 per month for 2015)

The fee for not having health insurance in 2016

The penalty is the lesser of:

A. Monthly Penalty Amount which is defined as:
The greater of 1/12th:
1. The sum of the penalties, $695 per adult ($347.50 per child) x the number of months there was no health insurance

or

2. 2.5% of total taxable income for 2015 x the number of months there was no health insurance.

OR

B. The total cost of the national average bronze plan coverage
As you can see the Penalties increase dramatically over the 2015 and 2016 tax years. The best way to avoid this is to make sure you and your family are covered, there is assistance available for low income families in the form of the Premium Tax Credit and if you qualify, through your state Medicaid program. To find out your options go to http://healthcare.gov to apply and find out what you’re eligible for. There is no purchase necessary to find out, but you will need to enter some income and family information to get qualified and you are under no obligation to sign up for an insurance plan. Open Enrollment ends December 15th.

 

 

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