Don’t you hate the mid-December stories about year-end tax tips? Like you don’t already have enough to do at the end of the year, now you are supposed to squeeze in these money savers (after you’ve committed your funds to holiday gifts!). So here is a timely list of tax saving tips for 2015 that you have plenty of time to take advantage of:
(And make sure you consult with your own tax advisor to see which ones are right for you)
1) Take a retirement savings deduction – Whether it is a SEP-IRA or a self-employed 401K, there are numerous methods for real estate professionals to reduce their taxable income and ensure that you have sufficient savings into your retirement. Don’t rely on Social Security to get by once you retire – and take a tax write-off of up to 25% of your earnings, depending on your corporate structure and your age.
2) Pay your health care expenses pre-tax – if you have a high deductible health plan (HDHP), then you can contribute to an HSA (Health Savings Account) and reimburse yourself for qualified medical expenses (like copayments, coinsurance, and out-of-pocket medical and dental expenses). The contributions to the HSA are deducted from your income before calculating taxes. The maximum contribution to an HSA this year is $3,350 for and individual and $6,650 for a family. If you are over 55 years of age, you get an additional $1,000 boost to the contribution limits.
3) Home office tax deduction – what real estate pro doesn’t have a home office? Starting in 2013, there is a simpler method to deduct your office space – just take your square footage and multiply it by $5. That’s it! Consult with your tax advisor on whether you may qualify for this deduction.
4) Maximize your automobile expense deductions – For so many real estate pros, the car almost feels like the office (you spend so much time there!). You can deduct expenses for the car with good record keeping of the miles you drive for business purposes. Then you must decide whether you will deduct your costs using the standard mileage rate ($0.575 per mile in 2015) or allocate your actual costs (insurance, gasoline, lease payments, etc) based on the % of miles driven for business. Just remember that while you can switch from the standard rate method to the actual cost method, you cannot switch back to standard rate on the same vehicle.
5) Self-employed health insurance premium deduction - Deduct your health insurance premiums (health, dental, vision) on the front page of your tax return – you do not have to itemize to get this valuable income deduction.
6) Equipment cost deductions – if you bought a laptop, tablet, or phone in 2015, consider writing the entire amount of those expenses off in the year you purchased it. You may qualify for a section 179 deduction which allows for small equipment write-offs in the year purchased.
7) Track all of your business expenses – Your MLS fees, your marketing expenses, your Realtor dues, closing gifts, your business lunches – they are all deductible to some extent. So keep all of your receipts and track your expenses in a spreadsheet as the year goes on. This will make year-end tax calculations so much easier.
It is NEVER too soon to plan for your year-end tax bill. And squeeze in some time to think about 2016 too!
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