As is par for the course, Congress waited until the last minute to approve the tax extenders for 2015 with the “Protecting Americans from Tax Hikes Act of 2015.” President Obama signed it into law. This law extends various tax breaks for individuals and businesses. Below is a list of some of these extensions:
The following deductions, credits and provisions for businesses were made permanent:
Section 179 Property Deduction – Section 179 allows a business to expense up to $500,000 in fixed assets placed into service during the current tax year. If the cost of your qualifying section 179 property placed in service in a year is more than $2,000,000, you generally must reduce the dollar limit (but not below zero) by the amount of cost over $2,000,000. If the cost of your section 179 property placed in service during the year is $2,500,000 or more, you cannot take a section 179 deduction.
Research and Development Tax Credit
Built In C Corp Gains for S Corp Election – The built in gain period is 5 years for S Corps that were previously taxed as a C Corp. An S Corp with built in gains will be taxed at the corporate tax rate if gains are recognized within the 5 year period.
The following is a temporary extension for businesses:
Bonus Depreciation – Bonus depreciation allows a business to take additional depreciation on capital assets purchased during the tax year. For the 2015 and 2016 tax years, the business may take up to 50% in bonus depreciation. This drops to 50% for the 2018 tax year and 30% for 2019.
The following deductions, credits and provisions for individuals were made permanent:
- American Opportunity Credit
- Earned Income Tax Credit
- Up to $250 educator deduction for a certain classroom supplies
- Partial exclusion of income for mass transit and parking benefits provided by an employer
- Tax-free distribution for direct contributions from a retirement account to qualified charitable organizations
- Child Tax Credit
- State and local sales tax deduction – allows for the option of using taxes paid instead of state and local income tax payments as an itemized deduction. The sales tax deduction may be more beneficial than deduction state and local income tax payments if the taxpayer purchased a high end item, such as a vehicle.
- Computer and Technology Costs – these are now included as qualified 529 education expenses
The following changes for individuals were extended through December 31, 2016:
- Discharge of Mortgage Debt – Up to $2 million of principal residence mortgage debt forgiveness may be excluded from income
- Mortgage Insurance Premiums for principal residence – These will be considered qualified residence interest.
- Tuition Deduction – The above-the-line deduction of qualified tuition and related expenses.
Additional details are available on the Ways and Means site.