Whew! You filed your individual tax return and now you’re ready to forget all about taxes until next year. Not so fast! Your 2015 tax return is a great tool to help you plan for 2016. Here’s what to look at.
Review your withholding. If you owed tax this year or received a large refund, consider adjusting your withholding. Underpaying your liability may result in unnecessary interest and penalties. Overpaying means giving the government an interest-free loan. You’ll need to complete Form W-4 and submit it to your employer to change your withholding.
Consider changes in the coming year. Life’s big events have an effect on your taxes. Are you moving for a new job, starting a business, buying a home, going back to school, or having a baby? You may be able to take advantage of certain deductions or tax credits. Look into the specific requirements for available deductions or credits so you’ll know what documentation you’ll need in order to take full advantage of any tax savings.
Reevaluate your retirement. Saving for retirement is one of the most effective ways to reduce your tax bill while keeping money in your own pocket. If you missed maxing out your retirement plan in 2015, look into increasing your 401(k) contribution or contributing to an IRA.
Add up itemized deductions. Will you have enough deductions to itemize in 2016? This year, the standard deduction is $6,300 if you file as single, and $12,600 if you’re married filing jointly. Think about changes during the year that may increase or decrease the amount of itemized deductions you can claim, such as buying a home, prepaying your real estate or state income tax, or donating to charity.
Stay informed. Tax laws evolve, and staying informed is important. We send regular updates through our e-newsletter, so make sure you’re signed up to receive it! If you need help, we’re available year-round. It’s never too late – or too early – to start planning for next year.