Need Tax Tips to save $$?
As REALTORS® we are proficient at selling real estate. We are not necessarily the best at book-keeping and tax law. Just like people hire us to assist in their real estate needs, we in turn depend on tax professionals and CPA’s to take advantage of all the deductions there are for small businesses while staying compliant with Federal and State Tax Laws. Doing it right at the front end just makes things so much easier should the IRS ever decide to audit.
Though I really try not to think about it, the end of 2015 is near and so is tax season. There are some things that I can still do now -and a couple that I can still do in the new year- in order to reduce the taxes owed for 2015. The Wilklow & Associates Office here in Colorado Springs was nice to remind me. Here are their tips:
1. Timing of income and expense: Time income and deductions to your tax advantage (bunching) – an example of this is waiting to take a distribution from an IRA until January, if you can wait (and are over the age of 59.5). Another example would be to pay an extra mortgage payment in the current year or making charitable contributions prior to 12/31/15.
2. State income tax: If you know you will owe state tax, then make an estimated tax payment by December 31st to utilize the itemized deduction in the current year.
3. HSA contributions: If you have a high deductible plan, consider setting up and contributing to an HSA. You have until 4/15/16 as long as you clarify that the contribution is for tax year 2015 – maximum for single is $3,350 and $6,650 for family.
4. Educational tax credits: If you have a child in college, review the income limitations for the American Opportunity Credit and consider contributing more to a 401k or a traditional IRA to stay within the qualifying limits. This credit is the most valuable education credit and is worth up to $2,500 per child. The credit is dollar for dollar for the first $2,000 of a student’s expenses and then 25% of the next $2,000. The phase out for married couples is from $160-180k; for singles the phase out is $80-$90k using what is referred to as a modified AGI.
5. Passive activities: Document your business activities and passive investment activities – if you have rental property, document your hours to determine your level of involvement. If you have a side business, document the time expended to see if you can qualify as an active investor rather than passive.
6. 1099’s: If you own a business or have investment properties, make sure to consider whether or not you need to produce 1099’s. For any contractor that you have paid at least $600 throughout the year, you must issue a 1099. These forms are due to the recipients by February 1, 2016 and the summaries are due to the IRS by February 29, 2016.
7. Business owners: If you own a business, consider accelerating deductions and deferring income if possible. There are plenty of income items and expenses you may be able to control.
8. Gifting: Consider gifting if you worried about estate limitations or would like to distribute wealth while you are alive. Although this is not a tax deduction, you and your spouse are eligible to exclude from a tax return gifts up to $14,000 per recipient per year. For example, you and your spouse may contribute $28,000 in any year to one individual. The estate tax exemption is $5.43 million for 2015.
9. 529 plan: Contributions to the Colorado 529 Plan(s) are deductible from Colorado state income tax in the calendar year of the contribution, up to your Colorado taxable income for that year. As a grandparent, or someone other than a parent, you may gift a contribution to a 529 plan. Your limitation is only the gift tax limit. The contribution reduces the state taxable income for Colorado as long as you set up a plan in Colorado (CollegeInvest).
10. Traditional IRAs: Always consider a traditional IRA contribution if you are eligible and if this helps you eliminate tax in the current year. You have until 4/15/16 to make a contribution for tax year 2015.
11. Investment activity: If you have investments that are at a loss, consider selling them prior to the end of the year to offset any gains for the year.
My trusted CPA team here in Colorado Springs is Wilklow & Associates, CPA, PC contact them with any questions you might have:
Wilklow & Associates, CPA, PC
Financial and Accounting Services
Now in Two Locations: Colorado Springs and Trinidad
Colorado Springs – 719.260.0320 x4
Trinidad – 719.846.3365
Fax – 719.445.0052–