Tax Bites

Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. But before you donate, it’s critical to make sure the charity you’re considering is indeed a qualified charity — that it’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Also, with the 2016 presidential election heating up, it’s important to remember that political donations aren’t tax-deductible.

Of course, additional rules affect your charitable deductions, so please contact us if you have questions about whether a donation you’re planning will be fully deductible. We can also provide ideas for maximizing the tax benefits of your charitable giving.

The first step to smart timing is to project your business’s income and expenses for 2015 and 2016. With this information in hand, you can determine the best year-end timing strategy for your business.

Deferring income to 2016. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.

Accelerating deductible expenses into 2015. If you’re a cash-basis taxpayer, you may make a state estimated tax payment before December 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.

If you expect to be in a higher tax bracket in 2016, accelerating income and deferring deductible expenses may save you more tax over the two-year period (though it will increase your 2015 tax liability).

For help projecting your income and expenses or for more ideas on how you can effectively time them, please contact us.