Tax Breaks Extended Retro-Active

Tax breaks referred to as "extenders “which had previously been expiring on an annual basis, have been renewed by Congress in mid-December. Many of the rules will be retroactive to January 2015 and may benefit some taxpayers on the 2015 federal tax return.

The “Protecting Americans from Tax Hikes Act of 2015” was signed into law on December 18, 2015. The new law will make some rules active through December 31, 2016, while other will be effective through 2019. There will also be some laws that will become permanent.

There will also be some provisions in the PATH act that will make changes to existing tax rules that were not part of the extenders. All of these changes will affect your tax planning for 2016 and future years. Here is a list of the rules selected.

* If you or a family member is an eligible student, you may be able to claim a tuition and fees above-the-line deduction for qualified higher education expenses for 2015 and 2016.

* The additional first-year depreciation deduction, known as "bonus depreciation," is generally extended through 2019 when you buy qualified business property. You can claim this deduction in conjunction with Section 179.

* The deduction for up to $250 of out-of-pocket educator expenses is now permanent. It will be indexed for inflation beginning with 2016 tax returns. You claim this deduction "above the line," meaning it's available even if you don't itemize.

* The optional itemized deduction for state and local sales taxes in lieu of deducting state and local income taxes is now permanent.

* The maximum Section 179 deduction for qualified business property, including off-the-shelf software, is now permanently set at $500,000 (subject to a taxable income limitation). The deduction is phased out above a $2,000,000 threshold.

* The rule allowing tax-free distributions from IRAs to charities is now permanent. When you're age 70½ and over, this break lets you make a qualified distribution of up to $100,000 from your IRA to a charity.

Do you need more information about the PATH act? At Summit CPA we are here to assist you with all of your tax and financial needs. We also specialize in 401k audits. Contact our office at (855) 977-7623 to schedule an appointment to find out how we can simplify your life.