Year End Tax Savings Tips

We are about to close this  year and some saving tips always help:

Child and Dependent Care Credit: You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you to work or actively look for work. The provided care may be in the household or outside the household but the care provider cannot be your spouse, the parent of the child, or a dependent who’s exemption you claim on your return.

Make Sure You Have Adequate Health Insurance Coverage: If you and your family don’t have adequate medical coverage, you may be subject to a penalty. The penalty amount varies based on the number of uninsured members of your household and your household income. If you have three or more uninsured household members, the penalty may be $975 or more for 2015 ($2,085 or more for 2016), depending on your household income.

Consider a Health Savings Account (HSA): If you are enrolled in a high-deductible health plan and don’t have any other coverage, you may be eligible to make pre-tax or tax deductible contributions to an HSA of up to $6,650 for a family coverage or $3,350 for individual coverage. Distributions from the HSA will be tax free as long as the funds are used to pay unreimbursed qualified medical expenses. Furthermore, there’s no time limit on when you can use your contributions to cover expenses. Unlike a healthcare FSA, amounts remaining in the HSA at the end of the year can be carried over indefinitely.

529 Plan Contributions: A 529 Plan is a type of investment account designed for college savings.  Withdrawals for qualified college expenses are tax-free and your contributions may be deductible against your state income taxes.  

Harvest Capital Losses: Review your securities portfolio for any losers that can be sold before year-end to offset gains you have already recognized this year or to get you to the $3,000 net capital loss that’s deductible each year. Don’t worry if your net loss for the year exceeds $3,000, because the excess carries over indefinitely to future tax years. Be mindful, however, of the wash sale rule when you jettison losers—your loss is deferred if you purchase substantially identical stock or securities within the period beginning 30 days before and ending 30 days after the sale date.

Zero Capital Gains Rate: If your taxable income is $37,450 or less if you are single, or $74,900 or less if you are married filing jointly you qualify for a 0% tax rate on long-term capital gains. Beware of the wash sale rules.

Prepaying State Taxes:  You may make a state estimated tax payment by Dec. 31, so you can deduct it this year rather than next. But consider the alternative minimum tax (AMT) consequences first.