21 Dec Last minute 2015 tax moves

Q. I haven’t really paid attention to my taxes this year, and I know I can do some things before Dec. 31. Except for charities and IRA contributions, what else can I do?
— Clock is ticking

A. There are lots of steps you can take to lower your 2015 tax bill. And you’re correct — you need to make these moves before the calendar year ends.

Let’s start with how much tax you will owe, and when you’re paying.

The law states you must pay the lower of 90 percent of what you owe each year or 100 or 110 percent of last year’s tax, depending on your income, said Gail Rosen, a Martinsville-based certified public accountant.

“Make sure you meet these qualifications to avoid paying any penalties on taxes owed for 2015, Rosen said.

You should also take a look at your portfolio.

Rosen said to qualify for the favorable long-term capital gains tax rate, you have to make sure that you hold assets for one year and one day before you sell them. If you have some investment loses, you can consider selling them.

“Capital losses you incur can offset your capital gains plus up to $3,000 of other income and any excess tax losses can be carried forward,” Rosen said. “Remember, don’t sell just for tax reasons. It should make economic sense.”

If you own any securities that are all but worthless with little hope of recovery, you might consider getting documentation that it is worthless before the end of the year, Rosen said. Then you can capitalize on the loss this year. You can deduct a loss on worthless securities only if you can prove the investment is completely worthless, she said.

You can pay your fourth quarter state estimate or increase your state withholding in 2014 rather than waiting for 2015 to pay it, Rosen said. You’d get a tax deduction on your federal return this year.

If you make that move, though, be sure to consider the Alternative Minimum Tax (AMT).

If you are subject to AMT, Rosen said, you will not get a benefit if you pay additional state taxes, miscellaneous itemized deductions, medical deductions and other items before year end.

You can also make your January 2016 mortgage payment on your residence before Dec. 31.

“Just keep in mind that if you do this in 2015, you have to do the same thing next year or you will only deduct 11 months of mortgage interest in 2016,” Rosen said.

And finally, remember that you must have adequate health insurance coverage to avoid penalties.

“The penalty for not having insurance in 2015 is the greater of $325 per adult and $162.50 per child — up to $975 for a family — or 2 percent of your household income above the filing threshold for your filing status,” she said.

One final note: you noted in your question that you can get deductions for charitable donations and IRA contributions. That’s true, just know that you have until the tax filing deadline to make your IRA contribution. You don’t have to do that by the end of the year.

Good luck getting ready for taxes, and when it comes time to prepare your return, send us your questions.

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This story was first posted in December 2015.