Earlier this month, President Obama signed the Protecting Americans from Tax Hikes (PATH) Act of 2015, extending a number of tax provisions that expired at the end of 2014. But unlike past tax extenders legislation, the PATH Act also makes some deductions and tax credits permanent for businesses and working families.
Here is a brief overview of key PATH Act provisions that may benefit you and your business.
For Individuals & Families
- Child Tax Credit: The expanded child tax credit ($1,000 per qualifying child) is permanently extended. If the credit is greater than the tax due, it may be refunded.
- Earned Income Tax Credit: The expanded credit for married taxpayers filing a joint return and taxpayers with three or more children is permanently extended.
- American Opportunity Tax Credit: The expanded credit of up to $2,500 for qualified higher education expenses is permanently extended. The refundable portion of the credit is $1,000.
- Tuition and Fees Deduction: The above-the-line deduction for up to $4,000 of qualified tuition and related expenses for higher education is extended through 2016.
- Educator Expense Deduction: The $250 above-the-line deduction for teachers is permanently extended. Beginning in 2016, teachers will also be able to include professional development expenses and the deduction amount will be indexed for inflation.
- Sales Tax Deduction: The option to deduct state and local general sales tax in lieu of state and local income taxes as an itemized deduction is permanently extended.
- Tax-Free IRA Distributions to Charity: Individuals who are at least 70½ can make qualified charitable distributions of up to $100,000 a year from their IRAs without including the distributions in gross income. This extension is permanent.
- Section 179 Expense: For 2015, businesses may again expense up to $500,000 of qualifying property. This provision is extended permanently and, beginning in 2016, the limitation and phase-out amounts will be adjusted annually for inflation.
- 15-Year Depreciation: The accelerated 15-year period for depreciating qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements is extended permanently.
- Bonus Depreciation: Bonus depreciation is extended through 2019. Businesses may claim an additional 50% bonus depreciation for property placed into service during 2015, 2016, and 2017, but the bonus depreciation percentage decreases to 40% in 2018 and to 30% in 2019.
- Research & Development Tax Credit: The R&D credit is permanently extended. Beginning in 2015, eligible small businesses may use the credit to offset AMT liability, and some small businesses will be able to use the R&D credit to offset the employer’s payroll tax liability.
- Work Opportunity Tax Credit: This credit, available to employers who hire qualified veterans, welfare recipients, or other target groups, is extended through 2019. Beginning in 2016, employers who hire long-term unemployed workers are also eligible to claim the credit.
Last-Minute Tax Planning Opportunities
The year is drawing to a close, but there’s still time to fit in some last-minute tax planning.
If you have questions about how the PATH Act affects you or your business, please feel free to contact one of our CPAs or request a complimentary accounting consultation or contact us at (616) 642-9467