The $680 billion tax extender bill has passed. It seems that every December, taxpayers and business owners are anticipating the tax extender bill nearly as much as the holidays. The Protect Americans from Tax Hikes (PATH) Act of 2015 has arrived gift-wrapped and just in time. This year there was a major change from prior year versions of the extender bill. This year many provisions were extended beyond 2016 or made permanent.
Here is a quick reference guide for some of the key provisions that were extended or made permanent. This is not a complete list, but just some of the highlights. For additional information or questions, please do not hesitate to contact us.
- The enhanced Child Tax Credit has been made permanent
- The American Opportunity Tax Credit for the first four years of higher education has been made permanent. The alternative deduction for tuition and fees has been extended through 2016
- The enhanced Earned Income Tax Credit has been made permanent
- The $250 deduction for educator expenses has been made permanent, indexed for inflation, and modified to include professional development costs
- The ability to deduct state and local sales tax has been made permanent
- Non-taxable IRA transfers to eligible charities has been made permanent
- The exclusion for discharge on home mortgage debt has been extended through 2016
- The deduction for PMI has been extended through 2016
- The credit for energy efficient improvements to non-business property has been extended through 2016
- The Research & Development credit has been made permanent. The credit has also been modified so that businesses can take it against AMT and the Employer portion of FICA beginning in 2016
- Section 179 depreciation levels of $500,000 with a phaseout starting at $2,000,000 has been made permanent and indexed for inflation
- Bonus Depreciation has been extended, but will drop from 50% to 40% in 2018, then 30% in 2019 before phasing out completely. The option to convert bonus depreciation into an AMT credit has also been extended
- 15 Year recovery periods for leasehold, retail, and restaurant improvements has been made permanent
- The Work Opportunity Tax Credit (WOTC) has been extended through 2019 and expanded to be more friendly for veterans
- The exclusion on the sale of certain small business stock has been made permanent as well as the 5 year gain recognition period for S Corp conversions with E&P
- The enhanced deduction for donations of food inventory has been made permanent
There are a couple other significant changes to note:
- Beginning in 2017, no refunds will be issued for returns claiming refundable Child Tax Credits or Earned Income Tax Credits before February 15th each year. This is a fraud prevention measure
- Section 529 plan eligible distributions will once again include the costs of computers and technology for higher education
- Qualified retirement plans that have been held for two years, including 401k plans, 403b plans, traditional IRAs, certain trusts, tax deferred annuities, and government 457 plans can now be rolled into a Simple Plan
While this is not a complete list, it covers many of the provisions that taxpayers have been eagerly awaiting as we approach year end. For information on additional changes in the tax law, please don’t hesitate to contact us.
Source: Thomson Reuters Checkpoint