This week I have great news for all my clients and subscribers waiting for congress to extend some key tax provisions. Congress gave us an earlier gift by approving permanent extensions of tax benefits for individuals and business that have long been temporary. The Protecting Americans from Tax Hikes Act of 2015, or PATH, has been passed by both the House and Senate and is expected to be signed into law by President Barack Obama.
The bill will end a frustrating cycle for millions of taxpayers. In the past, lawmakers have enacted popular temporary provisions, such as deductions for schoolteachers’ supplies or state sales taxes, and then left taxpayers hanging until the last minute as to whether the provisions would be renewed. These new provisions will make our tax planning work for clients more certain since we will not have to wait until the last minute for congress to extend these provisions.
Here are some key provisional tax benefits to become permanent:
IRA charitable transfers. This provision allows IRA owners 70½ and older to donate as much as $100,000 of account assets a year directly to one or more charities, such as schools, health care groups or churches. The donations count as part of the IRA owner’s required annual withdrawal—so if the owner’s required payout is $25,000 in 2015 and she donates $10,000 of IRA assets to her college and church, she only has to withdraw $15,000 from the IRA.
State and local sales-tax deduction. This provision allows taxpayers to deduct sales-tax payments instead of state and local income taxes on the federal return. This deduction is key for us living in our beautifil State of Florida where we do not have State Tax.
Educator-expense deduction. This highly popular write-off allows millions of K-12 teachers, and others who qualify, to deduct as much as $250 of unreimbursed expenses for classroom supplies. The law expands the provision to include professional-development costs and indexes it for inflation
American Opportunity tax credit. This benefit, which is often the best education tax break for many, was scheduled to expire after 2017. It is an offset of as much as $2,500 annually for as many as four years of postsecondary education.
Section 179 Expense. The provision permanently extends the small business expensing limitation and phase-out amounts in effect from 2010-2014 ($500,000 and $2 million, respectively). These amounts currently are $25,000 and $200,000, respectively. This is a key provision for business owners since you can buy qualified equipment and be able to write-off the full amount up to the limit of $500,000.
If you have any question regarding these permanent tax extensions and how you can use these tax breaks to your benefit , please call my office.
I wish you to have a safe and happy Merry Christmas with your families.
Have a great week!!!!
Julio Jiron, CPA