We’re in that awkward time of year, “taxually” speaking, when you’re evaluating the changes in tax regulations for 2015 so you can maximize your savings this year, and at the same time filing—or preparing to file (or, procrastinating your filing…) for 2014.
Here’s what they advise:
Increase planned retirement contribution
Limits for contributions to a Solo 401K, SEP IRA, and Profit Sharing plans were $52,000 in 2014 and jump to $53,000 in 2015. For a 401K, the employee contribution limit rises from $17,500 in 2014 to $18,000 in 2015, plus an additional $6,000 catch-up contribution for those over 50. These plans can save you substantial tax dollars by deferring pre-tax income to the future. Sole proprietors, partnerships, S Corps, or corporations can set up these plans. Contributions to self-employed plans can be made up until filing, including extensions. Plus, establishing a retirement plan for employees in lieu of raises can also save companies employment taxes.
Deduct business mileage
Deductions for use of your car for business can land you substantial savings. The official deduction for 2014 is 56 cents per mile; for 2015 it jumps to 57.5 cents. So, if you travel 10,000 miles annually for business in 2015, you’re entitled to a whopping $5,750 deduction. Keep a log of business travel but remember that travel from home to your office is considered “commuting,” which does not qualify as a business deduction for mileage.
Get the most out of your home office deduction
In 2014, a simplified deduction method was established that allowed for a deduction of $5 per square foot of area used exclusively for business (300 square foot maximum). That means a maximum $1,500 tax deduction for your home office. That said, for most taxpayers using a home office, the “regular” method provides a much higher deduction because it allows you to deduct a portion of your mortgage interest or rent, utilities, maintenance, etc. Bear in mind that you must keep track of these expenses to be able to substantiate the deduction. The IRS gives a more detailed explanation here.
Consider a healthcare allowance for employees
Businesses with less than 50 full-time employees are not required to provide health insurance under the Affordable Care Act. These businesses can, however, provide a healthcare allowance for their employees to purchase the health plan of their choice (and take advantage of tax credits/subsidies if they are eligible). This is a good way to provide benefits to employees while saving on employment taxes.
Take advantage of extended depreciation deductions
Special depreciation methods such as Section 179 depreciation and Bonus depreciation were extended in 2014 and are expected to be re-extended in 2015 (these come courtesy of the American Recovery and Reinvestment Act—President Obama’s “stimulus” passed in 2009). These methods allow a one-time deduction of either the entire cost of an asset (Section 179) or half the cost (bonus) in the year the asset is acquired. A new regulation allows full depreciation of leasehold improvements that are being fully replaced. The IRS lays it all out on their website.
For more than 25 years, partners Felecia Sternbach and Ellen Rose have been accountants based in Valhalla. Their combined experience includes myriad industries, from large banking institutions to small retail shops. They can be reached at (914) 940-4449 or info@SandRcpa.com.