Whether it is your first or tenth year running a business, now is a good time to begin thinking about your 2015 tax return. Familiarizing yourself with some basic year-end tax planning strategies will build confidence with 2016 nearing.
One common tax planning strategy used by individual and business taxpayers alike is an Installment Sale. Generally, a sale occurs when you transfer property. If a gain will be realized on the sale, income recognition will normally be deferred under the installment method until payments are received. So if you sell property prior to the end of 2015 and will receive payments in future years, you should consider reporting the gain on the property using the installment method to defer payments (and tax) until next year or later.
Another area to consider is Bad Debts. If you use the accrual method, you can accelerate deductions into 2015 by analyzing your business accounts receivable and writing off those receivables that are totally or partially worthless. By identifying specific bad debts, you should be entitled to a deduction. You may be able to complete this process after year-end if the write-off is reflected in the 2015 year-end financial statements. For non-business bad debts (such as uncollectible loans), the debts must be wholly worthless to be deductible, and will probably only be deductible as a capital loss.
Additionally, here are a few more business deductions to be aware of:
- Self-Employed Health Insurance Premiums: Self-Employed individuals are allowed to claim 100% of amount paid for insurance for medical care for themselves, their spouse and dependents as an above the line deduction (without regard to 10% AGI floor).
- Equipment Purchases: You may make a Section 179 Election, allowing you to expense otherwise depreciable business property. For 2015, you may expense up to $25,000 of costs.
- Home Office Deduction: Expenses attributable to using the home office as a business office are deductible if the home office is used regularly and exclusively: (1) as a taxpayer’s principal place of business for any trade or business; (2) as a place where patients, clients, or customers regularly meet or deal with the taxpayer in the normal course of business; or (3) in the case of a separate structure not attached to the residence, in connection with a trade or business.
Many more, less common and more complex business credits, deductions and planning strategies exist, as well as ever changing healthcare regulations. If you would like to ensure you are getting the most out of your business at year end or have any questions, please refer to our Tax Strategy Guide for Businesses or Contact Us.