Written by: Renee Vuylsteke, Enrolled Agent
2015 year end is quickly approaching so now is the time to start thinking about last-minute ways to lower your tax bill this coming tax season. Although the end of the year is close, there are still multiple opportunities to reduce the liability on your 2015 return, many of which need to be taken advantage of prior to December 31.
1. Although the machinery and equipment expensing option is greatly reduced in 2015 (unless retroactively changed by legislation), making expenditures that qualify for this option can still get you thousands of dollars of current deductions that you wouldn’t otherwise get. For tax years beginning in 2015, the expensing limit is $25,000, and the investment-based reduction in the dollar limitation starts to take effect when property placed in service durring the tax year exceeds $200,000.
2. Businesses may be able to take advantage of the "de minimis safe harbor election" to expense the costs of inexpensive assets and materials and supplies purchased before the end of 2015.
3. A corporation should consider accelerating income from 2016 to 2015 if it will be in a higher bracket next year. Conversely, it should consider deferring income until 2016 if it will be in a higher bracket this year.
4. If your business qualifies for the domestic production activities deduction (DPAD) for its 2015 tax year, consider whether the 50%-of-W-2 wages limitation on that deduction applies. If it does, consider ways to increase 2015 W-2 income, e.g., by bonuses to owner-shareholders whose compensation is allocable to domestic production gross receipts. Note that the limitation applies to amounts paid with respect to employment in calendar year 2015, even if the business has a fiscal year.
5. If you own an interest in a partnership or S corporation, consider whether you need to increase your basis in the entity so you can deduct a loss from it for this year.
These are just some of the year-end steps that can be taken to save taxes. We will need to stay in touch in the event Congress revives expired tax breaks to assure that you don’t miss out on any resuscitated tax-saving opportunities.
If you have any questions, or would like to discuss year-end planning, please contact our office at (314) 725-0324.