When it comes to deducting charitable gifts, 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 charitable donation deductions 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, let us know.

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 max out your 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:

1. The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.

2. 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 breaks your family might be eligible for on your 2015 tax returns — and which will provide the greatest tax savings — please contact us.

Today it’s becoming more common to work from home. But just because you have a home office space doesn’t mean you can deduct expenses associated with it.

Eligibility requirements

If you’re an employee, your use of your home office must be for your employer’s convenience, not just your own. If you’re self-employed, generally your home office must be your principal place of business, though there are exceptions.

Whether you’re an employee or self-employed, the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with that space.

A valuable break

If you are eligible, the home office deduction can be a valuable tax break. You may be able to deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space.

Or you can take the simpler “safe harbor” deduction in lieu of calculating, allocating and substantiating actual expenses. The safe harbor deduction is capped at $1,500 per year, based on $5 per square foot up to a maximum of 300 square feet.

More considerations

For employees, home office expenses are a miscellaneous itemized deduction. This means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses exceed 2% of your adjusted gross income (AGI).

If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income.
Finally, be aware that we’ve covered only a few of the rules and limits here. If you think you may be eligible for the home office deduction, contact us for more information.

Bonus depreciation allows businesses to recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) extended 50% bonus depreciation through 2017.The break had expired December 31, 2014, for most assets. So the PATH Act may give you a tax-saving opportunity for 2015 you wouldn’t otherwise have had. Many businesses will benefit from claiming this break on their 2015 returns. But you might save more tax in the long run if you forgo it.What assets are eligibleFor 2015, new tangible property with a recovery period of 20 years or less (such as office furniture and equipment) qualifies for bonus depreciation. So does off-the-shelf computer software, water utility property and qualified leasehold-improvement property.Acquiring the property in 2015 isn’t enough, however. You must also have placed the property in service in 2015.Should you or shouldn’t you?If you’re eligible for bonus depreciation and you expect to be in the same or a lower tax bracket in future years, taking bonus depreciation (to the extent you’ve exhausted any Section 179 expensing available to you) is likely a good tax strategy. It will defer tax, which generally is beneficial.But if your business is growing and you expect to be in a higher tax bracket in the near future, you may be better off forgoing bonus depreciation. Why? Even though you’ll pay more tax for 2015, you’ll preserve larger depreciation deductions on the property for future years, when they may be more powerful — deductions save more tax when you’re in a higher bracket.We can helpIf you’re unsure whether you should take bonus depreciation on your 2015 return — or you have questions about other depreciation-related breaks, such as Sec. 179 expensing — contact us.