Filing Your 2015 Tax Return
January 25, 2016
Certified Financial Planner, Brad Huss & Associates
It’s hard to believe another year has come and gone – with a new year comes the task of filing your 2015 federal and Arizona tax returns. While 2015 is behind us, you can still take steps to lower your tax liability.
Just as with the past several years, numerous tax provisions were scheduled to expire at the end of 2015, but they were then extended at the eleventh hour. The following extended provisions will have a direct impact on your 2015 tax return:
PROVISIONS PERMANENTLY EXTENDED
Section 179 Deductions: In recent years, taxpayers have been entitled to immediately deduct up to $500,000 of the cost of qualifying asset acquisitions (with a phase-out beginning at $2 million). These thresholds were due to plummet to $25,000 and $200,000 respectively, beginning on January 1, 2015. The new deal retains Section 179 at the higher limits, while indexing them for inflation in future years. Taxpayers will continue to be eligible to apply Section 179 to purchases of computer software, qualified leasehold, retail and restaurant improvements.
American Opportunity Tax Credit: From 2009 through 2017, taxpayers have been entitled to a $2,500 credit for four years of post-secondary education, with phase-outs beginning at $80,000 (if single) and $160,000 (if married filing jointly). In 2017, however, the credit was slated to return to a $1,800 annual maximum with lower phase-out thresholds. This deal makes the enhanced credit a permanent fixture in the law.
Itemized Deduction For State And Local Sales Taxes in lieu of income taxes. State and local income taxes paid in 2015 are qualified as an itemized deduction. However, you can deduct sales taxes paid in 2015 instead if the amount is greater. The IRS (irs.gov) provides a state sales tax table based on income and family size and you can add a factor for your city as well. The sales tax on big ticket items (auto, boat, R.V. home renovation) can be added to the tabled amount.
Teachers Out Of Pocket Supplies: Teachers are allowed an adjustment to income deduction of $250 for K-12 supplies for their students.
Charitable Donations: Taxpayers over 70.5 years old may allocate their Required Minimum Distribution (RMD) from their IRA directly to a charity of their choice (up to $100,000) and avoid the tax consequences of RMD income.
PROVISIONS EXTENDED THROUGH DECEMBER 31, 2019
Bonus Depreciation: The 50% immediate expensing of new asset acquisitions that we’ve known in one form or another since 2001 is on its last leg. It will be permitted at 50% for 2015, 2016 and 2017 before reducing to 40% in 2018 and 30% in 2019, when it will then disappear altogether.
PROVISIONS EXTENDED THROUGH DECEMBER 31, 2016
Energy Incentives: Up to $500 for personal energy property. Go to http://www.energystar.gov/about/federal_tax_credits.
Exclusion of debt forgiveness income on principal residence: 1099-C debt forgiveness income resulting from a foreclosure, short sale, or renegotiation is typically considered taxable income. However, if the property in question is a principle residence and if the related mortgage was used to purchase or improve the property, up to $2 million of debt forgiveness income may be excluded from taxable income. This provision was reinstated for 2015 and extended through 2016.
The 30% Credit For Major Solar Installations has been extended to year 2021.
2015 DEDUCTIONS AVAILABLE IN 2016
IRA: You can contribute up to $5,500 ($6,500 if age 50 or older) until 4/15/16 for the benefit of 2015. You may be allowed a deduction based on income and participation in other pension arrangements.
Simplified Employee Pension (SEP): You can contribute up to 20% of net self employed income or 25% of salary until 4/15/16 (9/15/16 for salary and 10/15/16 for self employed income if tax return is extended) for the benefit of 2015. The contribution reduces taxable income and the 2015 maximum is $53,000. A SEP can be established and funded in 2016 for the benefit of the 2015 tax return.
Health Savings Account: You have until 4/15/16 to fully fund your Health Savings Account for 2015. The individual plan maximum is $3,350 ($4,350 if age 55 or older) and the family plan maximum is $6,650 ($7,650 if age 55 or older).
Arizona Tax Credit For Private School Tuition Donation: Arizona allows a dollar-for-dollar tax credit against your 2015 tax liability for donations made to private school tuition programs by 4/15/16. The maximum donation is $1,067 for single and head of household filers and $2,134 for married filers. The donation will be a 2015 state tax credit and a 2016 federal charitable itemized deduction.
Arizona Tax Credit For Public School Donation: Arizona also allows a dollar for dollar tax credit against your 2015 tax liability for donations made to public schools by 4/15/16. The maximum donation is $200 for single and head of household filers and $400 for married filers.
Be sure to attend the upcoming Protecting Your Assets Seminar at the Arizona School of Real Estate and Business. I will be presenting along with attorneys Don Miner and Bill Gibney.
Brad Huss is an Enrolled Agent authorized by the U.S. Department of the Treasury to represent taxpayers before the IRS and a Certified Financial Planner who specializes in tax issues and tax return preparation with an emphasis on small business and real estate. He is the president of Brad Huss and Associates, Inc. which was founded in 1989, offices in Scottsdale, Arizona. Brad may be reached at (480) 998-1060 or by email at firstname.lastname@example.org.
PROTECTING YOUR ASSETS SEMINAR
Friday, February 26, 2016
9:00 am – 12:30 pm
You may think doctors, corporate executives and others in litigation-prone professions are the only ones who need to worry about protecting their assets – not so. Brad Huss will discuss how to lower your taxes and reduce liabilities. More topics covered: risk reduction, partnerships, LLC’s & PLC’s, asset preservation, estate planning, federal & state tax issues, self-employed guidelines and wills & trusts.
Credit: 3 Hours Legal Issues