TAX UPDATE - Tax Extender Bill Passed

U.S. lawmakers approved $1.8 trillion worth of federal spending and tax breaks on Friday, December 18th. “The Protecting American from Tax Hikes Act of 2015” (PATH Act) was approved by the Senate 65-33 and provided sweeping legislation that averted a government shutdown, locked in billions of dollars of tax breaks and scrapped a 40-year old ban on the export of U.S. oil.

We’ll discuss only the tax provisions here. The Bill makes permanent a number of business and individual tax incentives that expired at the end of 2014, extends some of these provisions for 5 years, and extends some additional provisions for only 2 years. The passing of this Bill is a great relief to tax advisors and taxpayers in general who have been dealing with the uncertainty in year-end tax planning.

Permanently Extended Provisions:

  • Tax-free treatment of distributions from IRAs (and most other retirement plans) by individuals age 70-1/2 and older for charitable purposes up to $100,000. This transfer must be made by the IRA administrator directly to the charity. For 2015, this transfer must be done prior to year end.
  • Itemized deduction for sales tax….very important for Washington state residents and those from other states without an income tax.
  • Section 179 annual expensing limitation of $500,000, however, gradual phasing out for those with more than $2 million in asset acquisitions
  • Research and experimentation tax credit
  • Exclusion of all of the gain from the sale of qualified small business stock acquired after December 31, 2014
  • 15-year depreciable life for qualified leasehold improvements
  • Provisions Extended for Five Years
    Bonus depreciation (bonus depreciation percentage is 50% in 2015, 2016 and 2017; 40% in 2018; and 30% in 2019). Bonus depreciation will be completely phased out in 2020 Work opportunity tax credit…available with respect to long-term unemployed persons

    A Few Provisions Extended
    Certain energy efficiency on commercial property have been extended through 2016 Energy credits with respect to facilities producing energy from certain renewable sources have been extended only for 2 years. Solar energy tax credits have been extended

    I hope you find this information to be helpful. Even though most of these provisions were expected to be passed for 2015, the uncertainty is now removed and allows us all to move forward with some year-end tax strategies that may have been put on hold.

    Please feel free to contact me if you have any questions about any of this.

    Happy New Year!!!