Top Issues for Taxpayers to Be Aware of for 2015 Tax Returns
1. Don’t Miss Valuable Deductions and Credits
- It’s always a good idea to claim all the deductions or credits for which you qualify. Maximizing your retirement contributions, for example, offers two benefits:
- Depending on the type of plan, you may be able to deduct those contributions from your income
- At the same time, of course, you also add to your retirement nest egg.
- Charitable gifts also can lower taxable income. And, the child and dependent care credit can help reduce your costs for a car regardless of your income. These are all possibilities to explore now to decrease the tax you’ll have to pay when you file your return in 2016. In addition, you still can qualify for numerous other overlooked or misunderstood deductions and credits that can lower your tax bite.
2. Sort Out Capital Gains and Losses
- If you are expecting to face capital gain taxes this year, loss harvesting can help reduce what you’ll pay. It involves selling any investment that has declined in value before year-end, including stocks, bonds, and mutual funds, so that the capital losses you report can offset your capital gains. You might also want to sell these investments as part of your overall investment strategy if, for example, there have been changes in the markets or in your investment goals during the year and you want to re-balance your portfolio to better reflect your financial needs. Keep in min, too, that you can deduct up to $3,000 of capital losses from your taxable income, so selling losing investments before year-end can be a smart move even if you don’t need to reduce capital gains taxes this year.
- Don’t neglect the potential tax consequences of mutual fund capital gain distributions, especially since many funds schedule their distributions around year-end. If you’re considering reorganizing your investments and one of your funds will make a distribution soon, you may want to ensure you sell that fund in time to avoid a taxable gain.
Top 3 Issues for Taxpaying Business Owners to Be Aware of for 2015 Tax Returns
1. Uncertainty about when Congress might extend expired tax credits and deductions
- The expired provisions include the deduction for state and local sales taxes, the exemption for cancellation of debt on a principal residence, the deduction for mortgage insurance premiums, and teachers’ deductions for classroom expenses.
- Up in the air for business owners is the provision regarding depreciation of property (furniture, equipment, etc.). Unless Congress acts, the section 179 expense limit for 2015 will be $25,000.
2. Affordable Care Act requirements for reporting health insurance coverage -or lack of it -on their income tax returns
- Information reporting by employers’ on proof of coverage for their employees takes effect this year, making it easier for taxpayers to determine whether they had health insurance coverage during 2015 that met the law’s requirements.
- The fee or penalty for NOT having health insurance increased in 2015, so those who are uninsured will now pay a fine of the higher of 2% of income or $325 per uninsured person ($162.5 per child under 18). The fee increases in 2016 to 2.5% of income or $695 per person ($34 7 .5 per child under 18), so taxpayers who opted not to pay premiums in 2015 may need to reevaluate that choice in 2016. For future years, the fee will increase with inflation. Open enrollment for 2016 starts November 1 and runs through January 3I, 2016.
3. Taxpayer identity theft will continue to occur-don’t make it easy for thieves
- Protect your information -shred mail, don’t be fooled by “phishing” scams, check your credit report regularly at www.annualcreditreport.com and report any breaches immediately to all three credit reporting agencies; visit www.identitytheft.gov to know in advance what steps to take if your personal information is breached or if you are a victim of identity theft.
- Business owners need to secure their networks, train their staff about the importance of protecting customers’ data and restrict access to only those employees in need of it, and audit regularly for breaches.
Taxpayers should remember these deductions when preparing their 2015 tax returns:
Deductions taxpayers may be able to claim even if they don’t itemize:
- Contributions to retirement plans and health savings accounts
- Alimony payments
- Capital losses
- Interest paid on student loans
- Qualified tuition and expenses
Examples of deductions taxpayers may be able to take if they itemize:
- Mortgage interest
- Charitable contributions
- Job search expenses
- State and local income and personal property taxes
- Medical expenses
- Casualty and theft losses