06 Jan New Tax Extender Legislation Makes Key Tax Provisions Permanent
Rounding out the 2015 calendar year, the Consolidated Appropriations Act was signed into law on December 18, 2015. This legislation also contains the Protecting Americans from Tax Hikes (PATH) Act of 2015 in Division Q of the bill allowing for many expired provisions from the end of the 2014 year to be extended permanently and often times modified. Several other provisions have been extended for two (2) or five (5) years.
Below are some of the major changes we felt may be important to you and/or your business:
Individual:
| American Opportunity Tax Credit
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Permanent
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A modified version of the Hope Credit, including a maximum credit amount, number of years education is covered, income phase-out ranges, and stipulations on refunds
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| Earned Income Tax Credit
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Permanent
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Refund incentive for families with three (3) or more children. Includes increased phase-out range for married couples filing jointly.
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| Child Tax Credit
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Permanent
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Set at $3,000 (not indexed for inflation). If the credit exceeds tax liability, an amount equal to 15% of earned income over $3,000 may be refunded.
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| Qualified Charitable Distributions (QCDs)
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Permanent
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Allows individuals 70 ½ or older to make tax-free distributions from individual retirement accounts to qualified charitable organizations
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| Deduction for Qualified Higher-Education Expenses
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Extended for two (2) years (through 2016)
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For qualified tuition and fees paid for post-secondary education through 2016. Deduction of up to $4,000.
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| Mortgage Insurance Premiums
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Extended for two (2) years (through 2016)
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Deduction of mortgage insurance premium
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| Deduction for Classroom Expenses Paid by Educators | Permanent | Deduction of classroom expenses for elementary and secondary education professionals. Up to $250 paid out-of-pocket during the year |
| Credit for Nonbusiness Energy Property
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Extended for two (2) years (through 2016)
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$500 remains the lifetime cap.
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| Deduction for State and Local General Sales Taxes
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Permanent
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Itemized deductions on Schedule A of IRS Form 1040 will have option to elect to deduct state and local general sales taxes in lieu of state and local income taxes.
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| Discharge of Qualified Personal Residence Debt
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Extended for two (2) years (through 2016)
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Exclusion of debt associated with a qualified principal residence from gross income.
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| Qualified Conservation Contributions of Capital Gain Real Property
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Permanent
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Deduction of contribution of real property interests for conservation purposes.
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| Employer-Provided Mass Transit Benefits
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Permanent
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Tax benefit for employer-provided transit passes and van pools. Set to the same level as the exclusion for employer provided parking.
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Businesses:
| Work Opportunity Tax Credit
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Five (5) year extension (through 2019)
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Tax credit for hiring qualified individuals.
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| Research Credit
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Permanent
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Modifications effective after year 2015 that provide additional benefits to some small businesses.
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| Bonus Depreciation
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Five (5)year extension (through 2019)
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Depreciation of certain business property: 2015-2017 at 50% bonus depreciation, 2018 at 40%, and 2019 at 30%.
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| Exclusion of Gain on Qualified Small Business Stock
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Permanent
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100% exclusion from gross income from the sale or exchange of qualified small business stock held for more than 5 years by non-corporate taxpayers.
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IRC Section 179 Expensing
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Permanent
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These are just some of the tax saving opportunities. To learn more about these or others, please contact us:
Disclosures:
This material is made available for general education purposes based on publicly available information and acquired from sources we deem reliable though we cannot guarantee the completeness of the provided information. Any information contained within this communication can change without notice and should not be acted on without obtaining professional advice tailored to you and your business’ individual and specific needs. Tax advice written in this communication is not intended or written to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code