January 31, 2016
Even though it is 2016, there are still ways to save on your 2015 tax bill!!!
YES, I know it is January 31, 2016, but you can still save money on your 2015 taxes!!!
Many of my clients ask me, “I know it is 2016, but is there anything I can still do to save money on my 2015 taxes?”
You might be surprised to know that the answer is YES!
Even though we are more than a month into 2016, you can still make certain money moves that can significantly decrease your tax liability for 2015, and even increase your refund, in some cases by several thousand dollars.
Here are the top two moves I recommend to my clients, and in particular growing families, who are still seeking ways to reduce their prior year’s tax liability:
1) Contribute to a Traditional Individual Retirement Account (IRA) by April 18th. You can still contribute to a Traditional IRA in 2016 and get credit for it on your 2015 taxes. In fact, you can even claim the Traditional IRA on your tax return, obtain your refund, and then make the contribution, as long as it is all done before April 18th. A contribution to a Traditional IRA, in contrast to a Roth IRA, is considered to be done with “pre-tax” dollars, which reduces your adjusted gross income and therefore your tax liability. IRA contribution limits for 2015 are $5,500 per person (this limit is an overall cap that applies to all of your IRAs, whether Traditional or Roth), or $6,500 if you are 50 years of age or over. There are certain phase-out limits if you are a high income earner, so this strategy may not work for everyone. Also, if you have a retirement plan through your employer, you may not qualify to contribute to a Traditional IRA, so check with your Enrolled Agent.
2) Depending on your state’s rules, you may be able to contribute to a 529 College Savings Plan by your state’s tax due date. This strategy is specifically attractive to families who are saving for their children’s college education. While this will not save you money on your federal taxes, it might reduce your state tax bill, depending on the state in which you live. I am based in Iowa, and I am happy to report that Iowa recently extended the due date for 2015 contributions to April 30th, 2016. I also prepare tax returns for many clients outside of Iowa, and other states have similarly extended deadlines for 529 College Savings Plan contributions, including Georgia and Oregon. Again, check with your Enrolled Agent to see if your state has an extended deadline for this kind of contribution.
While these money moves are great ways to save on your tax bill, they of course make tremendous sense from a financial planning perspective.
I hope these tips help you save money on your 2015 taxes!