Let's face it, who doesn't want to owe less taxes at the end of the year? But how do you turn that desire into a reality? Here at Online Trading Academy,
we stress the importance of making a personal tax strategy part of your overall
wealth management plan. An important aspect to this is not
missing out on deductions. Here are some money saving deductions you might be overlooking on your personal income taxes.
Cost of Education: To maintain or improve skills required in your current business.
Charitable Contributions: You can donate cash or other items. Under the
Pension Protection Act, you will need a written receipt for all
charitable donations. Many charities now accept credit cards. This allows you to make and deduct the donation this year but pay for it in 2016.
Pre-pay Property Taxes: Pre-pay (some or all) of 2016 taxes.
Make an extra mortgage payment: The extra interest you pay will be added to this year's mortgage interest by your lender, increasing your itemized
Medical expenses: You can take a deduction for medical expenses exceeding 10% (7.5% for those age 65 or older) of your adjusted gross income (AGI).
Contribute up to your employer match: Many employers who offer a 401k will match up to 5% of your contributions. That means, if you save 5% the
employer will match an additional 5% which will help you attain your savings goal. You want to make sure you take advantage of that free money, so contribute up to
the amount they will match but not more; beyond that you should be investing in areas with greater flexibility and higher potential returns.
Defer income if possible: If you are self-employed or a business owner, you might elect to invoice customers in January so you don't have to
include that income in 2015. Keep in mind that it may only make sense to defer income if you think you will be in the same or lower tax bracket next year.
Sell losing investments to offset capital gains: You can lower capital gains by selling securities that have lost money. Losses offset gains
dollar for dollar and losses in excess of your gains can be deducted as well.
An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security in a wash sale. The rule defines a wash sale as
one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a “substantially identical” stock or security, or
acquires a contract or option to do so. If the loss is disallowed by the IRS because of the wash sale rule, the taxpayer has to add the loss to the cost of the new stock, which
becomes the cost basis for the new stock.