Returning Value Blog

Divide interest into these categories

Are interest expenses deductible? The answer is a complicated “yes and no.” Essentially, it depends on the type of interest expense incurred. Although there are technically other types, interest expenses can be lumped into four main baskets for tax purposes. 

As employers have increasingly turned to high-deductible healthcare plans to offset sharp increases in employees’ healthcare plan costs, some employees have taken advantage of available Health Savings Accounts (HSA) as a way to manage these high deductions. Similar to an IRA, employees contribute a certain percentage of their pay through pre-tax deductions that accumulate tax-free until the money is spent on approved medical costs.

Understand and realize the key differences

Don’t be fooled into thinking that cash flow and profit are the same thing. In fact, there are major differences. Cash flow is dynamic and moves daily, while profit is a snapshot of income and expenses at a specific point in time. Understanding this comparison, and acting upon it, can be significant for a small-business operation.

The Research Credit Is Back for Good

Like Arnold Schwarzenegger’s character in The Terminator, the research credit is back. This valuable tax break, which had officially expired and been restored more than a dozen times in the past, was extended again by the Protecting Americans from Tax Hikes (PATH) Act, retroactive to the beginning of 2015. What’s more, the credit has been made permanent, with certain modifications, by the new PATH Act.

The Opportunity

As you consider ways to reduce your federal, state and local tax liability, be sure you don’t overlook prepaid expensing. Prepaid expenses cover any payments your business is making for goods and services to be received in the near future, such as prepaid insurance and prepaid maintenance agreements. Unlike accrued expenses, your business will receive the benefits of your payment in a later period. For accrual basis taxpayers, this means that the tax deduction for prepaid expenses won’t be available until after the cash has been expended.

Maximize tax benefits on 2015 returns

For a small-business owner who works out of his or her personal residence, a home-office deduction can provide significant tax savings, year in and year out. But keeping detailed records is critical. Although you may elect to use a simplified method for deducting home-office expenses on your 2015 tax return, the actual expense method usually produces a bigger deduction.

Special tax break for gifts of property

Facebook founder Mark Zuckerberg made news recently by promising to give away 99% of his net worth, including his Facebook shares, to charity. The arrangement takes advantage of a unique tax break for charitable gifts of appreciated property, such as stock.

Popular fringe benefit for employees

Flexible spending accounts (FSAs) can be a low-cost addition to your company’s benefits package. You can provide FSAs for your employees to cover health care expenses, dependent care expenses—or both—within certain tax law limits.