♠ Posted by Marc J. Soss in 2015 Retirement Account Contributions,2015 Retirement Limits,2016 Retirement Account Contributions,2016 Retirement Limits,estate plan,florida probate attorney,Florida Retirement,Sarasota Tax Lawyer at Tuesday, November 10, 2015
Year end retirement planning deadlines you need to meet in order to qualify for income tax deductions and credits:
Make last-minute 401(k) contributions. An employee can contribute up to $18,000 to a 401(k) account in 2015. Workers age
50 and older can make catch-up contributions worth an additional $6,000, or a
total of $24,000 in 2015, which are also due by Dec. 31. An investor over age
50 who is in the 25 percent tax bracket and maxes out his traditional 401(k)
will save $6,000 on his federal income tax bill. But even a smaller
contribution of $5,000 would save him $1,250 in taxes. At a minimum, double
check that you have saved enough to get any employer match offered by your
company.
Take required minimum distributions. Retirees born before
July 1, 1945, are required to take distributions from their individual
retirement accounts and 401(k) plans by Dec. 31, 2015. The distribution amount
is calculated by dividing the account balance by an IRS estimate of your life
expectancy, and sometimes a spouse's age is also taken into account. The
penalty for missing a required distribution is a stiff 50 percent of the amount
that should have been withdrawn. However, if you turned 70 1/2 in 2015, which
is those born after June 30, 1944, and before July 1, 1945, there is a special
rule that allows you to delay your first required distribution until April 1,
2016. But the second (and all subsequent) distributions will be due by
Dec. 31 of the same year. Retirees who delay their first required minimum
distribution will need to take two distributions in the same year. "Taking
a double distribution in 2016 could cause you to pay more for taxes and may
even push you into a higher tax bracket," says Helga Cuthbert, a certified
financial planner for Cuthbert Financial Guidance in Decatur, Georgia.
"You're usually better off taking it the year you turn 70 1/2."
Extra time for IRA contributions. You have until April 15,
2016, to contribute up to $5,500 to an IRA that can be applied to tax year
2015. Workers age 50 and older are eligible to contribute an additional $1,000,
for a total contribution of $6,500 in 2015. You can reduce the amount you owe and help increase your
retirement savings by putting some money in an IRA.
Claim the saver's credit. If your adjusted gross
is below $30,500 for individuals, $45,750 for heads of household and $61,000
for couples in 2015 and you contribute to a 401(k) or IRA, you may be able to qualify for the savers credit. This valuable tax credit is worth between 10 and 50
percent of the amount you contribute to a retirement account, up to $2,000 for
individuals and $4,000 for couples.
Get ready for 2016. 401(k) and IRA
contribution limits will remain the same in 2016. But if you weren't able to max out your accounts in 2015, consider setting your contribution amount a little
higher next year. If you get a raise, bonus or tax refund, redirecting part of
it to a retirement account will set you up for a lower tax bill in 2016.
