Extension means businesses can take bonus depreciation on their 2015 returns – but should they? Bonus depreciation allows businesses to recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) extended 50% bonus depreciation through 2017. The break had expired December 31, 2014, for most assets. So the PATH Act may give you a tax-saving opportunity for 2015 you wouldn’t otherwise have had. Many businesses will benefit from claiming this break on their 2015 returns. But you might save more tax in the long run if you forgo it.
What assets are eligible For 2015, new tangible property with a recovery period of 20 years or less (such as office furniture and equipment) qualifies for bonus depreciation. So does off-the-shelf computer software, water utility property and qualified leasehold-improvement property.
Acquiring the property in 2015 isn’t enough, however. You must also have placed the property in service in 2015.
Should you or shouldn’t you? If you’re eligible for bonus depreciation and you expect to be in the same or a lower tax bracket in future years, taking bonus depreciation (to the extent you’ve exhausted any Section 179 expensing available to you) is likely a good tax strategy. It will defer tax, which generally is beneficial. But if your business is growing and you expect to be in a higher tax bracket in the near future, you may be better off forgoing bonus depreciation. Why? Even though you’ll pay more tax for 2015, you’ll preserve larger depreciation deductions on the property for future years, when they may be more powerful — deductions save more tax when you’re in a higher bracket. We can help If you’re unsure whether you should take bonus depreciation on your 2015 return — or you have questions about other depreciation-related breaks, such as Sec. 179 expensing — contact us at 724-439-3455 or email email@example.com.
Avoid a 50% penalty:
Take retirement plan RMDs by December 31
After you reach age 70½, you must take annual required minimum distributions (RMDs) from your IRAs (except Roth IRAs) and, generally, from your defined contribution plans (such as 401(k) plans). You also could be required to take RMDs if you inherited a retirement plan (including Roth IRAs).
If you don’t comply — which usually requires taking the RMD by December 31 — you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t.
So, should you withdraw more than the RMD? Taking only RMDs generally is advantageous because of tax-deferred compounding. But a larger distribution in a year your tax bracket is low may save tax.
Be sure, however, to consider the lost future tax-deferred growth and, if applicable, whether the distribution could: 1) cause Social Security payments to become taxable, 2) increase income-based Medicare premiums and prescription drug charges, or 3) affect other tax breaks with income-based limits.
Also keep in mind that, while retirement plan distributions aren’t subject to the additional 0.9% Medicare tax or 3.8% net investment income tax (NIIT), they are included in your modified adjusted gross income (MAGI). That means they could trigger or increase the NIIT, because the thresholds for that tax are based on MAGI.
For more information on RMDs or tax-savings strategies for your retirement plan distributions, please contact us at 724-439-3455 or email firstname.lastname@example.org.
Don’t miss your opportunity
to make 2015 annual exclusion gifts
Recently, the IRS released the 2016 annually adjusted amount for the unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption: $5.45 million (up from $5.43 million in 2015). But even with the rising exemptions, annual exclusion gifts offer a valuable tax-saving opportunity.
The 2015 gift tax annual exclusion allows you to give up to $14,000 per recipient tax-free — without using up any of your gift and estate or GST tax exemption. (The exclusion remains the same for 2016.)
The gifted assets are removed from your taxable estate, which can be especially advantageous if you expect them to appreciate. That’s because the future appreciation can avoid gift and estate taxes.
But you need to use your 2015 exclusion by December 31. The exclusion doesn’t carry over from year to year. For example, if you and your spouse don’t make annual exclusion gifts to your grandson this year, you can’t add $28,000 to your 2016 exclusions to make a $56,000 tax-free gift to him next year.
Questions about making annual exclusion gifts or other ways to transfer assets to the next generation while saving taxes? Contact us at 724-439-3455 or email email@example.com!
Protect your deduction: Verify that a charity is eligible
to receive tax-deductible contributions before you donate.
Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. But before you donate, it’s critical to make sure the charity you’re considering is indeed a qualified charity — that it’s eligible to receive tax-deductible contributions.
The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.
Also, with the 2016 presidential election heating up, it’s important to remember that political donations aren’t tax-deductible.
Of course, additional rules affect your charitable deductions, so please contact us at 724-439-3455 or email firstname.lastname@example.org if you have questions about whether a donation you’re planning will be fully deductible. We can also provide ideas for maximizing the tax benefits of your charitable giving.
Hello to all my friends and business associates out there. The time has come to get involved with politics and your future. If you sit back and do nothing, you have no idea what is about to happen to you on January 1, 2013. This is a time for, not just voters to come out, it is a time for "Knowledgeable" voters to come out. A time for knowledgeable voters to contact their congressmen and senators and express their educated factual positions.
If the current stalemate in the House and Senate continues and the President does not offer a new quality plan, all the current tax breaks we have enjoyed the last ten years will expire on December 31, 2012. This will negatively impact all Americans no matter what their income bracket is.
Let's keep in mind that the tax breaks implemented during the Bush Administration brought more money into the US Treasury than anytime before in history. If it were not for the spending extravaganza enjoyed by both the Democrats and Republicans in both houses, we would not be in a deficit position right now. No amount of money is enough, if you are spending like a drunken sailor!
If tax rates are allowed to increase, I can tell you all from my 30 years of experience as a CPA, people WILL NOT SELL, entrepreneurs WILL NOT take RISKS on new ventures, WILL NOT BUY equipment and WILL NOT HIRE people .
If people do not sell or take risks, it doesn't make any difference if the tax rates are 100%, the Treasury will bring in less money! This is the basic concept why lower taxes bring in more taxes into the Treasury. You show me a capital gain tax rate that goes from 15% to 25%, and I will show you a farmer that doesn't sell his land or a investor that doesn't sell his stock. You show me an income tax rate that goes from 35% to 40% or 45% and I will show you a businessman that doesn’t put his house up for collateral in order to start a business, grow profits, buy equipment and hire people. This is not my opinion, I have been in business long enough to see this happen.
We have serious issues facing us; higher taxes, deficit spending, health care legislative penalties, politicians sacrificing our grandchildren's future for their own political gain and for the sake of getting re-elected by unknowledgeable voters.
It's time to get educated and learn the facts. Stop believing everything you hear or read from the media, stop listening to opinions from media appointed political strategists - let's get the facts and vote on the facts!!