With less than two months left for Congress to act on passing 2015 tax legislation, and moving even more slowly than last year regarding extender provisions, it’s a prudent time to consider tax planning options based on the law as it stands for 2015.

Deferring income into 2016 will be one of the most common techniques.    Cash method taxpayers can defer their income by adjusting their billing to after year end, and purchases to before.  Maximization of the Section 179 deduction (currently $25K), and other depreciation options will be another opportunity.  There may be additional opportunities to accelerate deductions in the form of partial dispositions on major repairs, casualty and theft losses, bad debts, abandonments, write-down of subnormal goods, and timing of corporate dividends.  Some other options to consider for additional deductions are whether or not a business owner qualifies for a home office, domestic production activities deductions , and special rules that apply to vehicles with a GVWR over 6,000 lbs.  Certain rules for deducting health insurance can also serve to multiply the tax savings for incurring this expense in the most beneficial manner.

In most instances deferral to 2016 will be the goal, but in cases where a much higher income is expected in 2016, accelerating income into 2015 to avoid higher tax brackets in 2016 becomes an option.  Many of the techniques mentioned above for accelerating income can be applied in reverse to accomplish this effect.

There are also several credits that may apply if planned for in advance, such as the Small Employer Pension Plan Startup Cost Credit, Credit for Employee Health Insurance Expenses of Small Employers, Employer-Provided Child Care Credit, and the Credit for Increasing Research and Development.  All of these have specific requirements that must be met in order to comply, and failing to do so can cost their availability.

Finally, Congress may yet act before year end.  Earlier in the year the Senate Finance Committee advanced legislation with the same temporary extenders we’ve been seeing for the last few years, but the House of Representatives refused to move forward unless the legislation contained permanent provisions.  While the current outlook for passing legislation is unlikely, it should not be ignored.  The horse, as the expression goes, may yet talk.

If you have and questions on how these options and opportunities may apply to your situation, we would be happy to set up an appointment and discuss them with you.

Written by Damien Falato