Tax Law Updates

On December 18, 2015, the President signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) which extended, or made permanent, a number of popular tax provisions.  For individuals, deductions or credits extended include:

  • State and Local Sales Tax Deduction – the election to claim an itemized sales tax deduction , instead of an income tax deduction, has been made permanent starting with  2015 tax returns
  • American Opportunity Tax Credit – this education credit, which was set to expire after 2017, has been made permanent
  • Charitable Distributions from IRA’s – the provision allowing individuals age 70 1/2 and older to make certain tax-free distributions from IRA’s  to qualified charities has been made permanent
  • Teachers’ Deduction – also made permanent is the deduction for elementary and secondary school teachers’ out-of-pocket classroom expenses.  The $250 ceiling on this deduction is indexed to inflation starting in 2016 and, also beginning in 2016, certain professional development expenses are eligible for the deduction
  • Tuition/Related Expenses Deduction –  the deduction for qualified tuition and fees for post-secondary education has been extended for 2015 and 2016 tax returns
  • Mortgage Insurance Premium Deduction – likewise, the deduction for mortgage insurance premiums treated as qualified residence interest is extended through 2016
  • Residential Energy Property Credit – the energy credit for certain energy improvements such as insulation, energy efficient windows and heating and air conditioning systems has been extended through 2016
    For businesses, popular deductions or credits extended include:
  • Section 179 expensing – the expensing  limit and phase-out amount, which had been scheduled in 2015 to revert to $25,000 and $200,000 respectively, have been permanently  extended at their 2014 levels of $500,000 and $2,000,000, and have been indexed to inflation starting in 2016
  • Recognition Period for S Corporation Gain – the Act makes permanent the five-year recognition period for built-in gain following conversion from a C to an S corporation
  • Bonus Depreciation- bonus depreciation has been extended through 2019 on the following schedule: 50% for 2015-2017, 40% for 2018, and 30% for 2019

For more information, or for information on other deductions and credits affected by the PATH Act, please call our office.