The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended a wide variety of tax breaks, in some cases making them permanent. Extended breaks include many tax credits — which are particularly valuable because they reduce taxes dollar-for-dollar (compared to deductions, for example, which reduce only the amount of income that’s taxed).
Here are two extended credits that can save businesses taxes on their 2015 returns:
1. The research credit. This credit (also commonly referred to as the “research and development” or “research and experimentation” credit) has been made permanent. It rewards businesses that increase their investments in research. The credit, generally equal to a portion of qualified research expenses, is complicated to calculate, but the tax savings can be substantial.
2. The Work Opportunity credit. This credit has been extended through 2019. It’s available for hiring from certain disadvantaged groups, such as food stamp recipients, ex-felons and veterans who’ve been unemployed for four weeks or more. The maximum credit ranges from $2,400 for most groups to $9,600 for disabled veterans who’ve been unemployed for six months or more.
Want to know if you might qualify for either of these credits? Or what other breaks extended by the PATH Act could save taxes on your 2015 return? Contact us!
There’s not much time left to make tax-saving moves for 2014. Some ideas to consider:
- Make your January mortgage payment before December 31 to squeeze an extra interest deduction into 2014.
- Make tax-free gifts to use your annual gift tax exclusion for 2014. This year you can give up to $14,000 to as many individuals as you like without tax consequences. These gifts to individuals are not deductible by you; nor are they taxable to the recipients.
- Sell appreciated stock to offset capital losses taken earlier in the year and vice versa. Any excess loss can offset up to $3,000 of ordinary income in 2014, and losses greater than that can be carried to future years.
- Use your credit card to pay tax-deductible expenses by December 31 if you’re short of cash. You can deduct the expenses on your 2014 return even though you pay your credit card bill in 2015.
- If you’re required to take a minimum distribution from your retirement plan, do so by December 31 or you face a 50% penalty. If you just turned 70½ this year, you could wait until April 1, 2015, to take a first distribution.
- If a wedding or divorce is in your year-end plans, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the dates of a year-end event may save taxes.
- To discuss these or other tax-cutting moves you might want to consider, give us a call now before it’s too late to act.
When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.
- Save for retirement. When you’re self-employed, you’re allowed to set up a retirement plan for your business. Remember, contributing to a retirement plan is one of the best tax shelters available to you during your working years. Take a look at the SIMPLE IRA, SEP IRA, or Solo 401(k), and determine which plan works best for you.
- Hire your kids. If your business is unincorporated, employing your child under the age of 18 might make sense. That’s because your child’s earnings are exempt from social security, Medicare, and federal unemployment taxes. This year, your son or daughter can earn as much as $6,200 and owe no income taxes. You get to deduct the wages paid as a business expense.
- Deduct health insurance. Are you paying your own medical or dental insurance? How about long-term care insurance? As a self-employed individual, you may be able to deduct 100% of the cost of these premiums as an “above the line” deduction, subject to certain restrictions.
- Take business-use deductions. Self-employed individuals can also deduct “mixed-use” items directly against their business income. Use your car for business and you can deduct 56¢ per business mile driven. The business-use portion of your computer purchases, Internet access, and wireless phone bills is also allowable. And if you meet the strict requirements, claiming the home office deduction makes a portion of your home expenses tax-deductible.
- Please give us a call to find out more about the tax breaks available to self-employed individuals.