Even though 2015 has ended, there are still some actions you can take to reduce your tax bill for 2015.
1. Contribute to a traditional IRA
If you have earned income from a job or self-employment, or receive alimony or combat pay, consider making a tax-deductible contribution to an IRA. You have until April 18, 2016 (April 19 if you live in Maine or Massachusetts) to make your contribution. The deduction limit is up to $5,500, or $6,500 if you were at least 50 years old by the end of 2015; you must have earned income up to this amount to make the maximum contribution.
If you participate in a qualified retirement plan at work, your deduction is limited or barred if your adjusted gross income is above a certain limit for your filing status. The following is the phase-out range. If you are below it, the contribution is fully deductible. If you are in the midst of the range, part of the deduction is allowable. If you are above the phase-out range, no deduction is allowed.
If you qualify to make a tax-deductible contribution, weigh the current tax savings against the opportunity to make a nondeductible Roth IRA contribution. Funds in a Roth IRA can become tax free in the future.
2. Contribute to a health savings account
If you were covered by a high-deductible health plan (HDHP) in 2015, you can contribute to a health savings account (HSA). An HDHP typically is a bronze-level plan in government Marketplace parlance. In fact, as long as you were covered by such a plan for all of December 2015, and continue in the plan for 2016, you can make a full-year contribution to a health savings account for 2015. The same contribution deadline for IRAs applies to HSAs. And, as in the case of IRAs, you don’t have to itemize to deduct HSA contributions.
Your maximum deductible contribution for 2015 is $3,350 for self-only coverage, or $6,650 for family coverage. If you were at least 55 years old by the end of 2015, you can add another $1,000 for either type of coverage.
3. Make smart tax elections
You have some flexibility to decide which taxpayer claims a particular tax break. Choose the one that saves the most tax for the family. Examples:
Conclusion
Don’t assume that there’s nothing you can do now to reduce your 2015 tax bill. Discuss your tax situation with a tax advisor to determine actions that can be helpful in your situation.
A statutory requirement for the deductibility of a business expense.