Next Avenue Logo
Advertisement

4 Tax Deductions You Don't Want to Miss

These write-offs can boost your refund or trim your taxes due

By Steve Grove

Knowing which deductions and credits you can claim on your tax return isn’t easy these days. For one thing, Congress lets popular write-offs expire, only to re-enact some at the last minute. For another, the tax rules are so complicated, it’s not hard to miss a tax break you’re entitled to take.

To help you avoid paying any more in taxes than necessary, here are four often-overlooked tax deductions that you may be entitled to claim on your 2015 return:

Itemized Deductions of State Income and Sales Taxes

If you itemize on your return, you can take an itemized deduction for any state and local income tax you paid throughout the year. This also includes state and local income tax you paid in states where you don’t live.

And late last year, Congress permanently extended (and made retroactive for 2015) the ability to instead deduct your state and local sales taxes rather than your state and local income taxes, if you itemize.

So you’ll want to determine which was higher — the sales taxes you paid or the income taxes you paid — and then deduct that.

Keep in mind that you will also be looking at your fourth quarter tax payment for the previous year’s state tax return, which might have been paid in January of 2016. Many people overlook last year’s fourth-quarter tax deposit paid during the current year and that may lead them to pay more to the IRS than necessary or receive a smaller refund than they deserve.

A State Income Tax Overpayment

When you overpay on state income taxes, the state provides you with a refund and a Form 1099-G. The 1099-G reports the amount of the tax refund as income, similar to the way the 1099-INT reports your interest income. People who get the 1099-G often include the amount as part of their tax return, but they may not have to do so.

If you couldn’t itemize your state tax deduction in 2014, then the amount reported on your 2015 1099-G is not taxable.

You can maximize your refund by not overreporting your income.

The Deduction for the Self-Employed

Advertisement

Consultants and people in business for themselves face a double tax on their self-earned income: any income earned from sources the IRS classifies as “self-employed” is subject to both the self-employment tax and to income taxes. Some relief is available; though. You can deduct 50 percent of the self-employment tax on your tax return.

To determine the amount eligible for deduction, examine line 27 of your Schedule SE (the Self-Employment Tax form).

Write-offs for Business Machinery and Equipment

Business owners typically deduct the price of machinery and equipment over the lifetime of the asset. But tax breaks known as expensing (or Section 179) and bonus depreciation provide a way to accelerate that deduction. So if you bought something for your business last year, you can write off some or all of it on your 2015 return.

Congress late last year renewed these tax breaks. The new law provided a permanent extension of expensing, with a $500,000 limit for the amount you can write-off in year one. (The equipment purchase price must be no more than $2.5 million; the $500,000 threshold is phased out for purchases between $2 million and $2.5 million.)

Additionally, the legislators extended the bonus depreciation rules until 2019. Under bonus depreciation, businesses can deduct up to half the purchase price of the qualifying items put in place during 2015, 2016 and 2017. The amount of the bonus depreciation drops to 40 percent in 2018 and to 30 percent in 2019.

If you run a business, to maximize this deduction, consider what purchases you can make through 2019, while the 50 percent bonus depreciation is still in effect.

To make the most out of your 2015 tax return, be sure to carefully consider the full range of opportunities, so you receive any tax savings you’re due.

Steve Grove is a managing director with CBIZ MHM and a Certified Financial Planner with more than 25 years of experience in providing  tax consulting and guidance services. Read More
Advertisement
Next Avenue LogoMeeting the needs and unleashing the potential of older Americans through media
©2024 Next AvenuePrivacy PolicyTerms of Use
A nonprofit journalism website produced by:
TPT Logo