A Few Last Minute Tax Deductions
With the New Year approaching, now is the time to squeeze out some end of year tax savings.
Save Up for Retirement- If you are a member of the clergy, you may have a 403(b) plan you have been contributing to throughout the year. If you have additional funds to use up before the end of the year, you may want to consider pushing more funds to your 403(b). Consult your employer and ask them about elective deferrals. Otherwise, you could consider contributing to a Traditional Individual Retirement Account (IRA). This is a self-funded retirement plan where you contribute pre-tax dollars by taxing a deduction on your tax return. When you take out from the plan, the distributions are taxable. The maximum IRA contribution for 2015 is $5,500 (or $6,500 if you are age 50 or older)
Buying New Equipment- If you are required to buy your own equipment (maybe a computer or printer), this may be a deductible expense. The expense must be considered ordinary and necessary. Remember, as stated in previous blog posts, employee business expenses are a game changer for clergy. It not only reduces their income tax, but also their self-employment tax (Social Security and Medicare Tax) as well.
Sell Stock- If you made money in the market, consider selling off some of your losing stocks. Not only will the losers reduce the gaining stock, but you may be entitled to take up to a $3,000 loss to reduce your taxable income.
Pay College Tuition Now- If you, your spouse, or children are attending college, you probably have a bill that is due sometime in January. While it makes sense to pay a bill on its due date, you may want to consider paying it off before the end of the year. By doing so, those funds will qualify for education credits and deduction on the 2015 tax return, rather than the 2016 Tax Return.
Pay your January Mortgage Payment Now- As you know, mortgage interest is an itemized deduction on your tax return. If you pay your mortgage before January, you can write off the interest for 2015, and get a bigger tax break.
Use Your Flex Spending- You’ve been contributing to it all year, and it’s been saving you money. However, what you may not know is that if you don’t use up all of your funds by the end of the year, you will lose it. Which means, it’s time to go see your doctor and refill your prescriptions, or maybe even buy a pair of eyeglasses or a box of contacts.
These are just some of many year-end deductions to save you money. To hear more, or to see if you qualify for these deductions, please contact Jacobson Clergy Tax Service. You can reach us by phone at (609) 375-8295 or through our website at jclergytax.com