Benefits-Related Tax Credits for Small Businesses
Two valuable credits are especially for small businesses that offer certain employee benefits. Can you claim one — or both — of these tax credits for small businesses on your 2015 return?
News & Tech Tips
Tax Update: Failure-to-File Penalty Increases
The increased penalty is effective for tax returns filed in calendar years after 2015, meaning it applies to the current tax season.
Navigating Deductions for Charitable Donations
When it comes to deductions for charitable donations, all donations are not created equal. As you file your 2015 return and plan your charitable giving for 2016, it’s important to keep in mind the available deduction:
Cash. This includes not just actual cash but gifts made by check, credit card or payroll deduction. You may deduct 100%.
Ordinary-income property. Examples include stocks and bonds held one year or less, inventory, and property subject to depreciation recapture. You generally may deduct only the lesser of fair market value or your tax basis.
Long-term capital gains property. You may deduct the current fair market value of appreciated stocks and bonds held more than one year.
Tangible personal property. Your deduction depends on the situation:
- If the property isn’t related to the charity’s tax-exempt function (such as an antique donated for a charity auction), your deduction is limited to your basis.
- If the property is related to the charity’s tax-exempt function (such as an antique donated to a museum for its collection), you can deduct the fair market value.
Vehicle. Unless it’s being used by the charity, you generally may deduct only the amount the charity receives when it sells the vehicle.
Use of property. Examples include use of a vacation home and a loan of artwork. Generally, you receive no deduction because it isn’t considered a completed gift.
Services. You may deduct only your out-of-pocket expenses, not the fair market value of your services. You can deduct 14 cents per charitable mile driven.
Finally, be aware that your annual deductions for charitable donations may be reduced if they exceed certain income-based limits. If you receive some benefit from the charity, your deduction must be reduced by the benefit’s value. Various substantiation requirements also apply. If you have questions about how much you can deduct, please contact us.
Copyright 2016 Thomson Reuters
image courtesy of Stuart Miles at freedigitalphotos.net
Reminder: Ohio Quarterly Municipal Withholding Deadline Change
Just a reminder for businesses filing municipal income tax withholding quarterly in Ohio: the deadline for quarterly filing has changed to the 15th day of the month following the quarter’s end. Previously, businesses had until the end of the month following the quarter’s end to file in many Ohio municipalities.
This deadline change went into effect Jan. 1, 2016 as part of tax reform in Ohio House Bill 5, and is one of several changes going into effect this year in an effort to create uniformity among municipal tax requirements.
Penalties for late filing of income tax withholding were also part of H.B. 5, allowing municipalities to charge up to 50% of the amount not paid on time.
The quarterly filing deadline change applies to employers that withheld less than $2,399 last year and less than $200 per month for the preceding quarter.
Other municipal deadlines for monthly withholding filers (due by 15th day of following month if previous year’s annual withholding was more than $2,399, or more than $200 in any month in preceding quarter) and semi-monthly withholding filers (due within three banking days of: 15thday of month and last day of month if previous year’s annual withholding was more than $11,999, or more than $1,000 in any month in preceding year) were standardized as part of H.B. 5, with many other provisions affected by the legislation.
To learn more about municipal tax code reform from H.B. 5, please contact your Whalen & Company representative.
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Tips for Education-Related Tax Breaks
If there was a college student in your family last year, you may be eligible for some valuable tax breaks on your 2015 return. To make the most of education-related breaks, you need to see which ones you’re eligible for and then claim the one(s) that will provide the greatest benefit. In most cases you can take only one break per student, and, for some breaks, only one per tax return.
Credits vs. Deductions
Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce only the amount of income that’s taxed. A couple of credits are available for higher education expenses:
- The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
- The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.
But income-based phaseouts apply to these credits.
If you’re eligible for the American Opportunity credit, it will likely provide the most tax savings. If you’re not, the Lifetime Learning credit isn’t necessarily the best alternative.
Despite the dollar-for-dollar tax savings credits offer, you might be better off deducting up to $4,000 of qualified higher education tuition and fees. Because it’s an above-the-line deduction, it reduces your adjusted gross income, which could provide additional tax benefits. But income-based limits also apply to the tuition and fees deduction.
How much can your family save?
Keep in mind that, if you don’t qualify for breaks for your child’s higher education expenses because your income is too high, your child might. Many additional rules and limits apply to the credits and deduction, however. To learn which education-related tax breaks your family might be eligible for on your 2015 tax returns — and which will provide the greatest tax savings — please contact Whalen & Company.
Copyright 2016 Thomson Reuters
Image courtesy of freeimages.com/Aaron Murphy