Ho, Ho, Ho, Congress delivers an early Christmas present to taxpayers. On December 18, Congress passed and the President signed a bipartisan tax extenders bill called the “Protecting Americans from Tax Hikes (PATH) Act of 2015”. The good news is that this bill makes several of the tax provisions permanent, a departure from the pattern of the past several years when Congress extended several provisions one year at a time. Here is a quick summary of the goodies. If you have any questions on how any of these provisions might apply to your tax situation for 2015 or beyond, please contact our office.
The following are key Individual tax provisions that were extended retroactive to January 1, 2015 and have been made permanent.
- Tax-free direct payouts from IRAs to charities of up to $100,000 per year. This provision is available for taxpayers age 70 ½ and older.
- Option to deduct state sales tax rather than state income tax (this is more important in states that do not have a state income tax).
- Deduction of up to $250 for teacher classroom supplies (Beginning in 2016, this will also include professional development costs).
- Enhanced ($1,000) Child Tax Credit.
- Enhanced ($2,500 per year for 4 years) American Opportunity Tax Credit.
- Enhanced Earned Income Tax Credit.
- Charitable deduction for contributions of real property for conservation purposes.
The following are key Individual tax provisions that were extended.
- Exclusion of up to $2 million cancellation of debt income for one’s primary home was extended through 2016.
- Deduction of mortgage insurance premiums extended through 2016.
- Deduction of higher education expenses extended through 2016.
The following are key Business tax provisions that were extended retroactive to January 1, 2015 and have been made permanent.
- Enhanced ($500,000) “Section 179” deduction. This provision was also enhanced with additional features such as allowing HVAC property to be eligible for this deduction beginning in 2016.
- 15 year Depreciable Life for Qualified Leasehold Improvements, Retail Improvements and Restaurant Property.
- Research credit. Also beginning in 2016, this credit can offset the Alternative Minimum Tax (AMT).
- The “Built-in Gain” recognition period for S corps is reduced to 5 years.
- Exclusion of 100% of the gain on the sale of qualified small business stock.
The following are key Business tax provisions that were extended.
- Work Opportunity Credit extended through 2019.
- 50% bonus first-year depreciation extended through 2019, although the bonus percentage is gradually reduced to 30%.
- Enhanced first-year depreciation cap for autos and trucks is extended through 2019, although the additional depreciation gradually decreases from $8,000 to $4,800.
If you do not see a provision which is important to you addressed in the above list, please contact us and we can tell you the current status.
Merry Christmas to all!