This month’s issue of the Boerne Business Monthly features an article written by Roland Miller, CPA, one of our tax staff. The full article is below. You can also access it by reading the online version of the BBM by clicking here. The end of the year has come upon us once again. It is the time of year when people start thinking of family and holiday gatherings. It is also a time when we begin to close the books on year 2015. But before we start making entries into the year 2016, we have some considerations on what might be helpful in planning for the 2015 tax year and possibly beyond. There are over 50 tax provisions that will need to be extended again for tax year 2015. These are like the Christmas fruitcake that gets passed around from house to house each year. These one-year extender provisions have been consistent holiday gifts for many recent tax years. However, we will have to wait until the end of the year again to see if Congress extends any of these provisions. Some of the more well-known provisions are:
- For individuals, the itemized deduction for state sales tax in lieu of income tax
- The $250 teacher supply deduction
- The Section 179 expense limitation— that if not extended will be reduced from $500,000 to $25,000
- Bonus depreciation.
For those individuals that donate to charity, there are some areas that you may wish to be aware. One of the provisions that may or may not be extended for 2015 is qualified charitable distributions from an IRA. A taxpayer who is 70 ½ is subject to required minimum distribution rules and must take at least a specific and calculated distribution from their IRA each year. A qualified charitable distribution allows a taxpayer to satisfy the required distribution rules if they elect to donate their distribution directly to a qualified charity. For any single cash donation of $250 or more, documentation will be required. This can be a cancelled check, bank record, credit card statement, or a written acknowledgement from the charity. If it is a non-cash donation, such as furniture or clothing items, a written acknowledgment from the charity will be required for your records. If the item being donated is over $5,000 in value, there must be an appraisal of the property performed within 60 days of the donation. There are other steps that you can take to reduce your tax liability in 2015 for both individual and business taxpayers. Strategies for Individuals You can defer part of your salary to a 401(k) plan, and you may be able to immediately increase your principal if your company offers matching contributions. Tax reform has permanently increased the amount you can save on a tax-favored basis, and the limits are set to rise with inflation in the coming years. For 2015, the contribution limit is $18,000. Current tax laws allow people nearing retirement the opportunity to accelerate their retirement savings. 401(k) participants who are age 50 and older may make additional “catch-up” contributions of $6,000, for a total contribution of $24,000. In addition to taking advantage of retirement opportunities through your employer, consider boosting your savings with another tax-friendly investment vehicle—the Individual Retirement Arrangement, or IRA. Depending on your income and participation in an employer-sponsored retirement plan, your contributions to a traditional IRA may be tax deductible. Potential earnings grow tax deferred. The total amount you are allowed to put into an IRA, or a combination of IRAs, is $5,500 for 2015. If you are age 50 or older, you may contribute an additional $1,000. Strategies for Businesses Over the next several years, rules regarding employer-sponsored health insurance will change, as a result of health care reform passed in 2010. In 2015 employers will not be required to offer health insurance plans, but they will be subject to “pay or play” rules. Small businesses with fewer than 25 employees that pay at least 50% of the health care premiums for their employees qualify for a tax credit of up to 50% of their premiums (up to 35% for nonprofits), if insurance is purchased through an exchange. The amount of the credit for a specific business is based on the number of its employees and the average wage. In 2015, a business with 50 or more full-time employees will be required to pay $2,000 per worker per year for all workers if even one of the company’s employees qualifies for and accepts a Federal health insurance premium subsidy. In addition, employers face a potential tax penalty of $3,000 per full-time worker per year for every full-time worker who qualifies for a health insurance coverage premium subsidy. Businesses can also benefit from analyzing the character of asset purchases. A cost segregation study can save you significant dollars because it identifies property that has been misclassified and is being depreciated as part of a building. By segregating property that can be depreciated over a shorter life span—such as landscaping, cabinetry, and fixtures—you are able to write off the cost of that property more quickly. While we hope we have shown you planning possibilities, it is important to keep in mind that many of these opportunities are temporary. At Akin, Doherty, Klein & Feuge, P.C., we can help you monitor changes in tax laws and update your strategies accordingly. We will be happy to meet with you and customize a plan for your circumstance. Contact us at 830-815-1100 for more information.