Congress Passes Tax “Extender” Legislation

By Dana McGuffin | December 23, 2015 |

Dana McGuffin CPA is excited to share with you that once again, Congress has arrived at a consensus to pass a tax bill – the tax extender legislation called “Protecting Americans from Tax Hikes (PATH) Act of 2015” – at the end of December, 2015!

The good news is that the beneficial tax provisions we have become accustomed to are retroactive to Jan. 1, 2015.

The better news is that many of these provisions have (finally!) been made permanent.

Highlights of the “Protecting Americans from Tax Hikes (PATH) Act of 2015”

FOR BUSINESSES

Section 179 Expensing of otherwise depreciable property:

The $500,000 expensing limitation and $2 million phase-out amounts are retroactively extended and made permanent.
For any tax year beginning after Dec. 31, 2015, both the $500,000 and $2 million limits are indexed for inflation.
The rule that allows expensing for computer software is retroactively extended and made permanent.
Qualified real property is eligible to be expensed for tax years beginning before 2016.
For tax years beginning after Dec. 31, 2015, expensing of qualified real property is made permanent without a carryover limitation.
For tax years beginning after Dec. 31, 2015, air conditioning and heating units are eligible for expensing.

Change of class life for qualified leasehold improvements:

Effective for property placed in service after Dec. 31, 2014, the Act retroactively extends and makes permanent the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class.

Bonus depreciation:

The Act extends bonus depreciation for qualified property acquired and placed in service during 2015 through 2019. Eligible taxpayers will be able to claim:

50% bonus depreciation allowance for qualified property placed in service in 2015 through 2017 ;
40% bonus depreciation allowance for qualified property placed in service in 2018; and
30% bonus depreciation allowance for qualified property placed in service in 2019.

Depreciation for Autos and Trucks subject to Luxury Auto Limits:

For property placed in service after Dec. 31, 2014 and before Jan. 1, 2018, the Act provides that the Code Sec. 280F limitation for a passenger auto or light truck or van that is qualified property is increased by $8,000.

Research Credit is Permanently Extended.

Reduction in S Corp Recognition Period for Built-In Gains Tax from 10 years to 5 years is Permanently Extended.

Exclusion of 100% Gain on Certain Small Business Stock is Permanently Extended.

FOR INDIVIDUALS

The American Opportunity Tax Credit is made permanent.
Child Tax Credit is made permanent.
Deduction for Educator Expenses is made permanent and indexed for inflation and expands the definition to include professional development expenses.
State and Local Sales Tax Deduction is made permanent.
Nontaxable IRA Transfers to Eligible Charities is made permanent.
Deduction for Higher Education Expenses is retroactively extended through 2016.