Multiple Retirement Plans

I make a SEP(simplified employee pension) and a Roth contribution every year. If you are a 401k plan participant, you can still do a IRA contribution too. Many people think if you do one type of plan you can't do the other. There are income limitations for making regular deductible IRA contributions and Roth contributions, but there is no limit for making nondeductible IRA contributions which you could then transfer to a Roth. It is a good idea in retirement to have a source of nontaxable funds like a Roth to draw on because more taxable income increases your medicare costs and taxable social security.

Tax Extenders

Congress passed on December the 18th a bill concerning tax extenders among other issues. The following provisions were made permanent:

1. The section 179 depreciation limit was increased to $500,000 and indexed to inflation for future years. This is very significant since the limit was only $25,000.
2. The research credit was made permanent.
3. The tax free distribution from IRA accounts by those aged 70 and 1/2 to charities was made permanent.
4. State and local sales tax itemized deductions will be available and especially helpful in those states without income taxes.


Some provisions were extended but not permanently such as bonus depreciation, work opportunity tax credit, exclusion from income for forgiveness of debt on a home foreclosure or short sale, and deductions for private mortgage insurance premiums.

8 Ways to Reduce your Taxes for 2015 Right Now

What can you do in the next two weeks to lower your taxes? Time is running out but you can still take the following actions:

1. Make noncash donations of clothing and household items to a recognized charity. Keep a receipt and a record of items donated and value each item per the valuation guide at salvationarmyusa.org.
2. Organize your tax documents and deductions in one file folder for the year.
3.If you have a business, delay mailing bills until late December so that payments won't be received until 2016. Pay your January business rent in December and buy office supplies.
4. Sell investments with losses so that you can offset any capital gains plus $3,000.
5. Now is the time to write a check to your favorite charity.
6. Pay your fourth quarter estimated state taxes by 12/31/15.
7. Increase your 401(k) contributions. This year workers can contribute up to $18,000 and if you are at least 50, you can contribute $24,000.
8. Instead of taking pretax funds from a  retirement account, consider taking funds from your Roth or a reverse mortgage. Both are sources of tax free cash flow.

Roth IRA Excess Contributions

If your income is too high, you can't make Roth IRA contributions. Instead you can make nondeductible IRA contributions because there is no income limit on those and there are no rules preventing you from converting the nondeductible contribution immediately to a Roth. You also have until the due date of the return plus the extension period of six months to withdraw an excess Roth contribution. If you miss the deadline, there is a 6% excise tax on excess contributions per year until the excess is withdrawn.

Tax Extenders for 2015

Current speculation is that the only tax extender that will done by Congress this year is the direct charitable transfer of $100,000 out of your IRA because of all the pressure from the charities. This is bad news for those businesses that are counting on the section 179 depreciation increase from $25,000 to $500,000. I'll keep you posted on any changes.