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Protecting Americans from Tax Hikes (PATH) Act of 2015

Congress has come up with a last minute reprieve to renew “tax extenders” under the Path Act of 2015. Finalized by Congress and signed by President Obama on Friday – along with the massive Omnibus Spending bill - PATH has retroactively reinstated tax incentives that had previously been both renewed and expired at the end of 2014.

The PATH Act, however, has permanently renewed many of these extenders while extending some provisions through 2016 and beyond. Following are some of the tax incentives:

Permanent Tax Extenders

Qualified Charitable Distribution (QCD) is allowed as a direct IRA to charity contribution up to $100,000 by a taxpayer over the age of 70½.  A QCD qualifies as a Required Minimum Distribution (RMD).  The contribution is not deductible but neither is the distribution taxable to the donor. Previously made RMDs in 2015, however, can’t be reversed.  

State & Local Sales Taxes - Individuals can deduct the higher of income or sales taxes on their itemized deductions.

American Opportunity Tax Credit was scheduled to lapse and revert back to the old Hope Credit after 2017.

Enhanced Child Tax Credit - The threshold amount to calculate the refundable portion of the credit has been made permanent.

Section 179 Expensing for certain business equipment purchases has been reinstated and the $500K deduction limit and $2 million phase-out limit have been indexed for inflation starting in 2016.

Section 529 Qualified Expenses - Computers and related expenses for software and internet access are now qualified expenses.

Section 529 ABLE Residency accounts set up for special needs beneficiaries no longer restrict the choice to the recipient’s resident state plan.

Section 1202 Small Business Stock Capital Gains Tax Exclusion on the sale of qualified small business stock, acquired and held for at least 5 years, has been made permanent.

Reinstated Non-Permanent Extenders

Mortgage Debt Exclusion on a short sale has been extended through 2016.

Private Mortgage Insurance Premiums (PMI) are deductible as mortgage interest through 2016.

Above the Line Tuition Expense deduction towards AGI versus the education tax credits is available through 2016.

50% Bonus Depreciation has been reinstated through 2017, reduced to 40% in 2018 & 30% in 2019.

Work Opportunity Tax Credits of up to 40% of the first $24,000 in wages for hiring a certain targeted employees are available through 2019.

If you have any questions about how these provisions might affect your personal tax situation please contact us.