In a recent blog post, Price CPAs let you know we were keeping an eye on Congress to see what actions they might take prior to the end of 2015. This year was much different than most – and the news is actually pretty good!
The “Protecting Americans from Tax Hikes Act of 2015” was recently passed by the House and the Senate and signed into law by President Obama on Friday, December 18, 2015. It extends a number of important tax breaks. What has been especially welcome news is that the bill has made many of the annual tax extender laws permanent going forward as well as allowing many of the remaining items to remain extended for a longer time period.
Here are a few the highlights of the legislation and the timing associated with each:
Tax Items made Permanent Tax Law:
- Deduction allowed for state and local sales tax vs. state/local income taxes
- Charitable donations of up to $100,000 made directly from an IRA being excluded from adjusted gross income
- Child Tax Credit set at $3,000 per child
- Section 179 maximum deduction up to $500,000 for assets purchased by a business during the tax year, with limits being adjusted for inflation beginning in 2016
- Businesses allowed a 15 year depreciable life for qualified leasehold improvements, qualified restaurant improvements and qualified retail improvements
- Reduction in the recognition period for built-in gains tax to 5 years for S corporations
- The exclusion of 100% of gain on certain small business stock
A few key items were extended for five years, through tax year 2019. Most notable of these items is the bonus depreciation allowed for businesses, which allows up to 50% of the cost of a qualified asset to be deducted in the year it is placed in service. The deduction percentage will be lowered during the five-year period but will still provide needed tax savings for business owners.
Tax Items Extended Two Years (2015 & 2016):
- Tuition and Fees deduction of up to $4,000 for higher education expenses
- Deduction of mortgage insurance premiums as if it were additional mortgage interest
- Certain exclusions for the discharge of principal residence mortgage debt
- Updated energy efficiency credits for both businesses as well as private homeowners
To read more about these permanent changes to the tax law and other tax items enacted, please click here. Remember any of the changes above which would be applicable to your individual or business tax situation and discuss them with your tax professional at Price CPAs. We are committed to making a positive difference in the financial experience of our clients.