President Obama signed the Protecting Americans from Tax Hikes Act of 2015
This past Friday, December 18, President Obama signed the extenders bill known as the Protecting Americans from Tax Hikes Act of 2015.
This law is different from previous extenders in that it made some provisions permanent and others more than the usual 2 years.
Provisions that have been extended permanently:
For businesses:
  1. Section 179 expense is now limited to $500,000 with a $2,000,000 overall investment limit before phase outBefore, it was a $25,000 maximum expense and an overall investment limit of $200,000.
  2. Research and development tax credit for business related qualified research expenditures and increases the alternative simplified credit from 14% to 20%.
  3. Five year recognition period for built in gains when a C corporation converts to an S corporation.
  4. 15 year straight line depreciation for qualified leasehold/tenant improvements. Otherwise, they would be depreciated over 39 years on a straight line basis.
  5. Basis adjustment in stock when an S corporation makes charitable contributions of property.
For individuals:
  1. State and local sales tax deduction.  This is especially important for residents of states that do not have an income tax.
  2. American Opportunity Tax credit.   The maximum tax credit is $2,500.
  3. Child tax credit.  Maximum credit is $1,000.   It may be refundable up to the extent of 15 percent of the taxpayer’s earned income in excess of $3,000.
  4. Educator deduction of $250 above the line.  Now, it will be indexed forinflation.
  5. Transit parity benefits.  Now, transit passes and parking will have the same limits.  ( $250 for 2015, $255 for 2016).
  6. Charitable distributions from IRAs.Contributing up to $100,000 from your IRA.  The distribution will count towards your minimum required distributions.  Available for taxpayers age 70 ½ and over.
  7. 100% percent gain exclusion for qualified small business stock.  It has to be held for at least 5 years. 
Provisions extended for five years:
  1. Bonus depreciation.  50% bonus for 2015 - 2017, 40% bonus for 2018, 30% bonus for 2019.
  2. Work Opportunity tax creditfor hiring certain disadvantaged employees. 
Provisions that were extended for 2 years:
For businesses:
  1. Three year recovery period for race horses.Otherwise, the recovery period would be seven years.
  2. Section 199 deduction for Puerto Rico. This would have been eliminated if the bill was not passed.
  3. Energy efficient credit for new homes and commercial buildings.
For individuals:
  1. Above the line deduction for tuition expense.  Maximum is still $ 4,000.
  2. Cancellation of debt on a principal residence up to $ 2,000,000. This would have been eliminated if the bill wasn’t passed.
  3. Mortgage insurance premium deduction.
The act also provided additional legislation apart from the extenders:
  1. The “Cadillac” tax on high-dollar health plans has been further delayed for an additional 2 years.   It now applies to tax years beginning after December 31, 2017.  Furthermore, the “Cadillac” tax will be deductible for income tax purposes.
  2. Purchase of computer equipment and technology from funds distributed by a section 529 plan is now considered to be a qualified expense.
  3. Qualified individuals can roll over funds from an employer-sponsored plan to a SIMPLE IRA.
  4. W-2 forms and 1099-MISC forms that report nonemployee compensation must be filed by January 31 of the following year.
  5. For academic periods starting after December 31, 2015, higher education institutions can no longer report the amounts billed on form 1098-T.  They have to report the amounts paid during the year.