Accountant Taxes and protecting Americans from Tax Hikes

With tax season looming, Congress has passed the “Protecting Americans from Tax Hikes Act of 2015” (Tax Extender Bill). In an effort to ensure you’re armed with the laws that apply to 2015 tax returns, we have outlined a partial list of extended items below.

Late, as usual, Congress finally passed legislation dealing with more than 50 tax provisions that expired December 31, 2014. With year-end tax planning reaching critical mass and tax season looming, taxpayers, tax preparers, tax software programmers, and the IRS are all breathing a sigh of relief now that we know what law applies to 2015 tax returns.

It is good news for those of us that dreaded the last-minute frenzy of late legislation that some tax provisions were made permanent. Others were extended from two to five years. Also, notice that beginning in 2016, there are modifications to some provisions.

Right now, a few of our clients will need an urgent phone call to tell them that an IRA transfer to charity is OK again or that the purchase of machinery or a business vehicle with a placed in service date before year-end can reap a big tax incentive.

The following is a partial list of the items extended, made permanent and/or modified in the extender bill. A complete list is included in the text of H. R. 2029, the “Protecting Americans from Tax Hikes Act of 2015.”
IRC Individual Provisions NEW Expiration Date
§24(d) Enhanced American Opportunity tax credit is made permanent. Beginning in 2016, the provision requires the taxpayer claiming the American Opportunity credit to report the EIN of the educational institution to which the individual made tuition payments.

Provision made permanent

25A Enhanced child tax credit is made permanent

Provision made permanent

§25C (g)(2) Mortgage insurance premium deduction as mortgage interest

December 31, 2016
§32(b) Enhanced earned income tax credit is made permanent.

Provision made permanent
§62 $250 teacher supply deduction is made permanent.

Beginning in 2016, the provision also indexes the $250 cap to inflation and includes professional development expenses.

Provision made permanent
§108 Exclusion for personal residence COD income is extended to Dec. 31, 2016.

December 31, 2016
§163 Mortgage insurance premium deduction as mortgage interest is extended to Dec. 31, 2016.

December 31, 2016
§164 Election for itemizers to deduct sales tax in lieu of income tax is made permanent.

Provision made permanent
§170 Contributions of real property for qualified conservation purposes is made permanent.

Provision made permanent
§222 Tuition deduction is extended to Dec. 31, 2016.

December 31, 2016
§408 IRA transfers to charity in lieu of RMDs is made permanent.

Provision made permanent
IRC Business Provisions NEW Expiration Date
§41 R & D tax credit is made permanent. Beginning in 2016 eligible small businesses ($50 million or less in gross receipts) may claim the credit against AMT liability, and the credit can be utilized by certain small businesses against the employer’s payroll tax liability.

Provision made permanent
§45P Wage credit for activated military reservists is made permanent. Beginning in 2016, the provision modifies the credit to apply to employers of any size, rather than employers with 50 or fewer employees, as under current law.

Provision made permanent
§51 WOTC for employers hiring qualified veterans and employees from other targeted groups is extended to Dec. 31, 2019. Beginning in 2016, the provision also modifies the credit to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 40% of the first $6,000 of wages.

December 31, 2019
§132 Increased fringe benefit allowance for transit passes is made permanent

Provision made permanent
§168 Bonus depreciation for qualified purchases is extended with revisions to Dec. 31, 2019(50% in 2015 – 2017, 40% in 2018 and 30% in 2019). The provision modifies the AMT rules beginning in 2016 by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation. The provision also modifies bonus depreciation to include qualified improvement property and to permit certain trees, vines, and plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted, rather than when placed in service.

December 31, 2019
§168 Election to accelerate AMT credit in lieu of bonus depreciation is extended to Dec. 31, 2019.

December 31, 2019
§168 15-year recovery period for qualified leasehold improvements, qualified restaurant property, and qualified retail improvements is made permanent.

Provision made permanent
§170 Enhanced charitable deductions for food inventory is made permanent. Beginning in 2016, the provision modifies the deduction by increasing the limitation on deductible contributions of food inventory from 10% to 15% of the taxpayer’s AGI (15% of modified taxable income in the case of a C corporation) per year. The provision also modifies the deduction to provide special rules for valuing food inventory.

Provision made permanent
§179 $500,000 expensing limit is made permanent. Beginning in 2016, the provision modifies the expensing limitation by indexing both the $500,000 and $2 million limits for inflation and by treating air conditioning and heating units placed in service in tax years beginning after 2015 as eligible for expensing.

Provision made permanent
§179 Treatment of certain real property as §179 property is made permanent. Beginning in 2016, the provision modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap.

Provision made permanent
§1202 100% gain exclusion for a qualified small business stock is made permanent.

Provision made permanent
§1367 Basis adjustment to S corporation stock for charitable contributions is made permanent.

Provision made permanent
§1374 Reduced built-in gains recognition period for S corporations is made permanent at five years.

Accountant Taxes and Protecting Americans from Tax Hikes

Accountant Taxes and Protecting Americans from Tax Hikes Act of 2015