CPA & Business Advisory Blog

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What’s New That Affects You? A Snapshot of 2015 Tax Law

The good news for taxpayers this year is no dramatic changes are in store.  However, the possibility of additional taxes triggered by new deductions or additional income could affect your tax bill or refund.

Unless Congress acts, several tax breaks will expire at the end of 2015, or have already expired.  Key tax breaks awaiting renewal include:

  • Deduction for state and local sales tax
  • Credits for buying energy efficient appliances or certain energy saving home improvements
  • Exclusion of mortgage debt cancellation (up to $2 million)
  • Bonus depreciation and increased Section 179 limit for businesses

As of Dec. 1, 2015, the Senate has proposed a two-year extension to these and other deductions, while the House of Representatives prefers a one-year extension.  If the past is any indicator, an agreement may not be reached until sometime after beginning of the year.  We will be monitoring Congress as these and other tax issues progress in the upcoming months and would be happy to discuss your situation with you if you have questions.

Other highlights affecting the filing of 2015 returns:

  • Additional taxes related to the Affordable Care Act (ACA; also known as Obamacare)
    • For Married Filing Jointly taxpayers:
      • Pay additional 0.9% Medicare surcharge on wages and self-employment income in excess of $250,000
      • Pay additional 3.8% net investment income tax on certain income if modified income exceeds $250,000
      • Sees itemized deductions and personal and dependency exemptions limited or completely phased out if income exceeds $309,900
    • For single taxpayers these additional taxes begin at $200,000
    • Important tax planning note: For the 0.9% additional Medicare surtax, withholding is only required on wages above $200,000.  If a couple’s combined income exceeds $250,000, no Medicare surtax withholding may have taken place if each spouse earned below $200,000.  This may result in an underwithholding (and possible penalties).  Ask us whether you should pay estimates to avoid these penalties.
    • Under the ACA, if you did not have qualifying health care coverage for yourself or any dependents for any portion of 2015, and do not qualify for an exemption, you will be subject to a penalty reported on your federal income tax return
  • What can you do to minimize taxes?
    • Maximize your retirement plan contributions to minimize income
      • $18,000 is the limit for 401(k)s if you are under age 50, $24,000 if over
    • Defer any bonuses, income or other capital gains to next year, if possible
    • Shift to investments that are not subject to the 3.8% net investment tax (e.g., exempt bonds)
    • Accelerate or defer medical payments if you are close to the 7.5% AGI floor for deductions
    • Pay real estate taxes and state and local taxes early if you will not be subject to alternative minimum tax
    • Offset any capital gains by harvesting losses in your taxable brokerage accounts
  • If you have dependents in college you may be eligible to claim the following credits or deductions:
    • American Opportunity Credit
      • Provides a tax credit of up to $2,500 per student
    • Lifetime Learning Credit
      • Provides a tax credit up to $2,000 per student
    • Tuition and Fees Deduction
      • Provides a deduction up to $4,000 for the taxpayer, spouse or dependent

If you are self-employed or own a business:

  • Tax breaks in limbo for businesses:
    • Bonus Depreciation – businesses have historically been able to deduct up to 50% of the cost in the first year an asset is placed into service
    • Section 179 – small businesses can immediately write off up to $500,000 of tangible business property placed in service during the tax year (e.g, computers and office furniture). However, the limit drops to $25,000 if Congress does not renew this deduction
  • Additional Self-Employed Income Tax Rates
    • 12.4% Social Security tax on income up to $118,500
    • 2.9% Medicare tax on all self-employment income
    • 0.9% additional Medicare tax on earnings over $200,000
  • What can you do to minimize taxes?
      • Consider paying employee bonuses to minimize income if you are expecting 2015 to be a profitable year
      • Review compliance with new tangible property regulations to determine if items should be expensed instead of capitalized
      • Maximize contributions to your retirement and your employees plans; also, explore options for providing health insurance if you are not doing so now
      • Accelerate payments to vendors to include expenses in current year (cash basis taxpayers)

Want to save on your taxes this year? Let our tax professionals find the best opportunities for your business to grow. Contact Brian Miller or call 440-449-6800 to make sure you are staying compliant with government regulations and filings.

12 Great Ideas for Tax Savings

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