By Georgette Cutler
Dec. 30, 2015
For most people the month of December means PREPARING for the holidays. We PREPARE by decorating our homes with holiday lights, hang wreaths, setup a Christmas tree and/or a menorah. We then PURCHASE holiday gifts for our family and friends and perhaps mail holiday greeting cards. As we CELEBRATE this special time baking holiday cookies, building gingerbread houses and roasting turkeys we GATHER with our friends and family to RECOGNIZE and acknowledge our respective faiths and our love and appreciation for one another. For most, this is a time of reflection of the past twelve months and the VISUALIZATION for the upcoming year filled with New Year’s resolutions.
Yes... this is very true; but as Gymnastics Club owners we can’t forget what December REALLY means… YEAREND TAXES!
As entrepreneurs yearend can mean all of those things and more! So before the year slips away, you want to take some time and see if you can do a few things to PREPARE for yearend and ultimately reduce your income tax bill or increase value to your gym club’s net worth.
PREPARE – First thing you can do is forecast what your gym club’s net income will be for 2015. Having a general idea of what your net income will be will allow you to consider deferring or reducing your anticipated income tax liability for 2015.
In general, the experts are expecting the 2016 individual income tax rate brackets to be the same as today; especially since 2016 is a presidential election year. If your gym club is a sole proprietorship, S corporation, LLC or a partnership your income falls under the individual income tax rate brackets. Knowing what tax rate bracket you fall under is important as well as having an idea if you anticipate your 2016 net income to be higher or lower in the coming year. See the current income tax rate brackets for reference.
2015 Individual Federal Income Tax Rate Brackets
| Single | Joint | Head of household | |
| 10% tax bracket | $0-9,225 | $0-18,450 | $0-13,150 |
| Beginning of 15% bracket | 9,226 | 18,451 | 13,151 |
| Beginning of 25% bracket | 37,451 | 74,901 | 50,201 |
| Beginning of 28% bracket | 90,751 | 151,201 | 129,601 |
| Beginning of 33% bracket | 189,301 | 230,451 | 209,851 |
| Beginning of 35% bracket | 411,501 | 411,501 | 411,501 |
| Beginning of 39.6% bracket | 413,201 | 464,851 | 439,001 |
If you project that your gym club’s income will be significantly higher next year you may want to accelerate your income into this year and/or defer any expenses you can into next year.
Depending on your cash flow, you may want to prepay some expenses; for example, if you are a cash basis business, prepay January’s rent in December so you can record the expense in the current year. You can pay bills with checks and mail them at year end and deduct those expenses even though they won’t be cashed until next year. If cash flow is tight, using your credit cards to pay next year’s bills is an option to record the expense in 2015 yet not pay the bill until next year once your statement is due.
PURCHASE- You still have time to purchase that new gym equipment, car or van to get your staff or team to the next competitive gym meet and get some tax savings in 2015.
Purchasing a heavy (GVWR of 6,000 lbs.) SUV, pickup or van is offers a quick federal income tax depreciation deduction via Section 179. You can claim up to a $25,000 deduction for the cost of a new or used heavy SUV that is placed into service before yearend and the remaining cost of the vehicle over the “regular” tax depreciation rules for the business portion over the next five years. Make sure you contact your income tax advisor before doing so to ensure you follow or know all the limitations.
Many of last year’s depreciation rules may be reinstated by Congress. Many tax experts/advisors anticipate this happening; and if so, assets placed in service before yearend will be able to take advantage of these accelerated depreciation deductions. Therefore, Section 179 instant depreciation deduction may be available for new and used computer equipment, software, office furniture, gym equipment, the experts expect Congress to restore the previous cap of $500,000 from the current limit of $25,000.
In addition to furniture and fixtures, the qualified real property expenditures deductions under Section 179 are anticipated to be restored up to $250,000 for qualified assets such as interiors of leased nonresidential buildings such as your gymnastics club.
Purchase energy efficient systems for your gym club. There are many energy investment tax credits that will be expiring at the end of 2016. Besides reducing your monthly utility expense, you may save up to 30% of the cost of equipment. Depending on the type of equipment you purchase, you may be eligible to qualify for a tax credit for reducing your energy usage under Section 179D. If you can reduce your energy and power costs by 16 2/3%, you can deduct $0.60 per square foot of the building floor area. If you reduce your energy by at least 50%, you can deduct a tax credit as much as $1.80 per square foot of your club’s space.
CELEBRATE – Celebrate your hard work by saving for retirement now. The maximum salary deferral for 401(k)/403(k) plans for 2015 is $18,000 if you are under the age of 50. If you are 50 or older you can defer an additional $6,000. The limits for 401(k) salary deferral will be the same for 2016.
If you don’t have a 401(k) plan at your gym club you may want to consider opening an IRA account. For 2015 the total contribution limits on a traditional IRA is $5,500 ($6,500 if you’re age 50 or older). See your tax advisor for verification of any deduction limitations prior to opening a new account.
GATHER – Gather together and assist your family by hiring your children to reduce your net income and build their futures at the same time. Putting the first $6,200 wages earned by your child into a Roth IRA account is tax free. The money it earns will be tax free and the first $6,200 your child earns falls under 0% income tax bracket hence no federal income taxes would be due. This is a great way to save for your child’s college fund or their first home. Withdrawing money from a Roth IRA prior to age 59 ½ would incur penalties, but those penalties can be waived if the withdrawals are for college education or purchase of a first time home.
RECOGNIZE – Recognize you hard working staff with year-end bonuses. If you are a cash basis tax payer, the bonus is deducted in the year the bonus is paid; but if you are an accrual basis tax payer you may accrue and deduct the expense of the bonus in the year the bonus is earned as long as the bonus is paid within 2 ½ months after the deduction is expensed. This is a great way to recognize your staff for doing an excellent job in 2015 and deferring the cash flow until March 15, 2016.
VISUALIZATION – Visualize 2016 and set goals for next year with your gym club team members. Create a budget with goals for growth in enrollment and profits. Make sure you are working with your tax advisor on where your gym club stands with the Affordable Care Act (Obamacare) and make sure you are in compliance with healthcare coverage or be aware if you may owe penalties for not having qualifying healthcare coverage. Note that Tax Day will be April 18th in 2016. The Washington D.C., holiday of Emancipation Day is Friday, April 15, 2016 so the tax deadline falling on a holiday or a weekend, extends the tax deadline till the following Monday for most taxpayers. For those who live in the New England states which celebrate Patriots Day, their due dates are extended until April 19th in 2016.
Lastly, develop an operating and marketing calendar for your club and stick to it. Plan on it being an amazing year for growth with the upcoming summer Olympics in Rio! Your USAG membership will be worth its weight in GOLD! Take advantage of the USAG membership offerings by checking out our club membership’s website to grow your gym’s enrollment, revenue and bottom line!