Tax season for 2014 is coming to a close. To that end we put together the Top 5 Ways to lower your tax bill in 2015.
- Open a retirement account or increase your contributions to them. Opening a retirement account is not only a great way to reduce your taxable income but also improve your future, financially speaking. Traditional 401(k) and IRA accounts will reduce your tax bill in 2015 but Roth IRAs and 401(k)s won’t, so make sure you choose the one that fits your situation the best. If you want to lower your tax bill this year, the traditional route is best but, if you want to be able to withdraw your money in retirement tax free, the Roth options are better.
- If you’ve had some sizable investment gains, offset them with the same amount of losses. If you sold a lot of your stocks in 2014 and had sizable gains, the capital gains taxes you’ll be paying next year could be significant. On the other hand, if you have some paper losses sitting around in your portfolio, selling some of those losing stocks, and generating an “official loss”, can offset those gains and lower your tax bill. For example, if you gained $7000 and lost $5000, your overall taxable gain would be just $2000.
- Don’t gamble with your gambling winnings and losses. The fact is, even though the saying is “What happens in Vegas stays in Vegas”, if you don’t report your winnings as taxable income to Uncle Sam, you could be in for some trouble. Luckily (pun intended) you can also deduct losses if you’ve had them, although you won’t be able to offset any taxable income or carry forward any gambling losses into the next year.
- Remember to deduct any job hunting or moving expenses that you incurred in 2014. If you spent some time out of work this year and thus spent money trying to find a job, you can deduct those expenses on your taxes. If you ended up finding a job that caused you to move you can also deduct those expenses, but only if your new employer didn’t pay for them.
- Take advantage of the home sale exclusion if you sold your house in 2014. This could help you to shelter upwards of $250,000 on any gains you made on the sale of your primary residence, which might be worth literally tens of thousands of dollars in savings come tax time. If you’re married and you and your spouse file jointly, you can shelter upwards of $500,000.
These are, as we said, the Top 5 ways to lower your tax bill next year. There are plenty of others, to be sure, and the more that you know the lower your tax bill should be next year. If you have questions or concerns, let us know by dropping us a line or sending us an email and we’ll get back to you with advice and answers.