This year, the last-minute extender legislation passed on December 18 as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015 contains good news for just about everyone. For the most part, many of the so-called tax extenders are made permanent.
Here is a list of the more common ones we see used by our clients at DHJJ. If you have questions on how this Act may affect you or your business, please contact your DHJJ CPA.
Individual provisions
Permanently Renewed
- The Child Tax Credit is set at $1,000 for each qualifying child under age 17 claimed as a dependent.
- The American Opportunity Tax credit is set at $2,500 for four years of post-secondary education.
- The Act permanently extends the educator expense deduction and, for tax years beginning after Dec. 31, 2015, modifies the deduction by indexing the $250 amount for inflation, including professional development expenses.
- The Act extends the option to claim an itemized deduction for State and local general sales taxes in lieu of an itemized deduction for State and local income taxes.
- The Act extends the ability of individuals at least 70½ years of age to exclude from gross income qualified charitable distributions from IRAs of up to $100,000 per year.
Extensions
- Discharge of indebtedness income from qualified principal residence debt, up to a $2 million limit ($1 million for married individuals filing separately) was excluded from gross income. The Act extends this exclusion for two years so that it applies to home mortgage debt discharged before Jan. 1, 2017.
- The Act retroactively extends through 2016 the above-the-line deduction for qualified tuition and related expenses for higher education.
Business provisions
Permanently Renewed
- The Act retroactively and permanently extends the research credit. In addition, for tax years that begin after Dec. 31, 2015, eligible small businesses ($50 million or less of gross receipts) may claim the credit against their alternative minimum tax (AMT) liability.
- The Act retroactively and permanently provides that, for determining the net recognized built-in gain, the recognition period is a 5-year period.
- The Act retroactively extends and makes permanent the $500,000 expensing limitation and $2 million phase-out amounts. Both the $500,000 and $2 million limits will be indexed for inflation.
- The Act retroactively extends and makes permanent the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class.
Extensions
- The Act retroactively extends 50% first-year bonus depreciation for two years so that it applies to qualified property acquired and placed in service before Jan. 1, 2017.
Energy provisions
Extensions
- The Act retroactively extends the nonbusiness energy property credit for two years, to apply to property placed in service after Dec. 31, 2014, and before Jan. 1, 2017.
- The Act retroactively extends the credit for energy-efficient new homes for two years (homes acquired before Jan. 1, 2017).
- A deduction is allowed in an amount equal to the cost of energy efficient commercial building property placed in service before Jan. 1, 2017.
If you have questions on how the Act may affect you or your business, please contact your DHJJ CPA at 630-420-1360, or email Scott Singer at ssinger@dhjj.com.
