1. Establish an IRA. Contributions up to $5,500 (or $6,500 if at least age 50) to a traditional IRA may be tax deductible if you have earned income and your adjusted gross income doesn’t exceed certain threshold amounts. You have until April 15, 2016 to contribute to an IRA.
2. Contribute to your employer’s 401(K) plan. You can have up to $18,000 (or $24,000 if at least age 50) withheld from your salary to reduce your taxable compensation and provide for future retirement needs.
3. Deferring income will delay taxes owed until next year. Bill your clients in January instead of at end of December or ask your employer to issue your end of year bonus check in January. Companies can still deduct bonuses paid in the beginning of 2016 on their 2015 tax return. Deferring income is a great idea if you have a high school senior or a student in college and you’re applying for financial aid for your student.
4. Sell stocks that have incurred a loss to offset your capital gains and up to $3,000 of other income. Any excess loss is carried forward to future years.
5. If you’re thinking about donating stocks to a charity, remember that if the stock has appreciated in value, donate the shares and you can take the fair market value of the donated stock as a deduction. If you sell these shares before you donate them, you’ll have to report the gain of the shares on your return. If the stock has decreased in value, sell the stock and donate the proceeds. This way you get to report the loss on your return.
6. To avoid the underpayment penalty, make sure you pay in the lesser of 100% of last year’s tax liability (110% if your adjusted gross income was more than $150,000) or 90% of this year’s tax bill.
7. Mail in your 4th quarter estimated state tax payment in December instead of January to get the tax deduction in 2015. However, consult a tax adviser if you expect to be subject to alternative minimum tax.
8. Likewise, pay your January mortgage payment in December to take the tax deduction for the interest paid on the 2015 return.
9. Have you thought about whether you qualify for a home office deduction? To get this deduction you need to use the office exclusively and regularly for business use. You may deduct a portion of your homeowner insurance, utilities, and depreciation of the home. You can also deduct any repairs or improvements done to the office. Alternatively, you may use the simplified option which allows you to calculate the deduction by multiplying the square footage of the home office space times $5 per square foot (limited to a maximum deduction of $1,500).
10. If selling business assets or real estate, consider an installment sale or a like-kind exchange to reduce the gain recognized in 2015. Such a move could also reduce your 3.8% net investment income tax imposed on net investment income for taxpayers with Modified Adjusted Gross Income exceeding certain amounts.
The tax law is complex. Please contact us if you have any questions or if we can assist you in any way.
Allen & Company, PC
1350 Wooten Lake Road, Suite 206
Kennesaw, GA 30144
Allen & Company, PC - a CPA firm serving Kennesaw, Marietta, Acworth, Woodstock and north Atlanta. Providing accounting, financial statement audit, taxation, and advisory services for individuals and businesses. Extensive experience working with franchised quick service restaurants and other franchised businesses.