In late December of 2015, the Protecting Americans from Tax Hikes Act of 2015 was passed in the House and the Senate and signed into law by the president. This act is crucial because it made many tax provisions, credits, and deductions permanent and extended many others. The following covers important highlights of what was made permanent:
- The Research and Development credit
- The treatment of certain real property as Section 179 property and increased expensing limitations – the $500,000 expensing limit and the $2 million phaseout threshold are going to be indexed for inflation starting in 2016, and the $250,000 cap on qualified real property will be removed.
- The exclusion of 100% of the gain on certain small business stock
- The enhanced Child Tax Credit – the additional child tax credit (refundable) is permanently set at a maximum of $3,000.
- The enhanced American Opportunity Credit
- The enhanced Earned Income Credit
- The deduction for certain expenses of elementary and secondary school teachers – currently allows teachers to deduct $250 spent on school-related supplies, will be adjusted for inflation starting in 2016.
- Parity for exclusion from income for employer-provided mass transit and parking benefits
- The deduction of state and local general sales taxes – the sales tax deduction can be very beneficial in states where they don’t have income tax or a taxpayer bought a vehicle and paid significant sales tax on it.
- 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
The following were extended and modified through 2019:
- Bonus depreciation will stay at 50% for 2015 through 2017, 40% for 2018, and 30% for 2019 – bonus depreciation can only be used on assets purchased new.
- The Work Opportunity Tax Credit was modified for employers who hire those unemployed for 27 weeks or more to be 40% of the first $6,000 wages
The following were revived and extended through 2016:
- Modification of the exclusion of mortgage debt discharge – discharge of qualified principal residence indebtedness can be excluded from income.
- Mortgage insurance premiums can continue to be treated as qualified residence mortgage interest
- The qualified tuition and related expenses above-the-line deduction – an adjustment to income worth up to $4,000.
- Over a dozen incentives for energy production and conservation
Feel free to read more here –
If you have questions about anything discussed above or any other tax-related questions, feel free to contact us. As always, thank you for checking out our blog, and we hope everyone is off to a great start in 2016!