I am happy to report that not only did Congress fulfill my request to give us clarification on what the law will be for the next 5 years, they actually made many parts of their changes permanent. This, I was not expecting. Had I known my request would be so successful I would have added for a few more items to my wish list (sarcasm intended).
So I promised an update before the law passed and here it is. Well, at least on part of the law changes. I won't bore anyone with information on the over 100 separate provisions; instead, I've highlighted just a few. As a general reminder, please note that there are a lot of gotchas to these tax laws, so you should always consult a tax advisor to make sure they apply to your situation and circumstances.
Here are some of my favorites from the bill:
- 179 Depreciation / 1st Year depreciation - The new dollar limitation is $500,000. This is permanent! This is exactly what needed to happen. Good work Congress! I guess better late than never. There are limits to the laws with vehicles and a dollar cap, but those limits were in place before.
- Bonus Depreciation - This law that allows a business deduction of 50% on "qualified property" has been extended through 2019; however, for 2018 it goes to 40% and in 2019 it goes to 30%. Qualified property general means new equipment, although there are a lot of other tricks on this one as well. Better call your tax preparer to check.
- Tuition Credits - The "American Opportunity Tax Credit" was made permanent. This is a big plus for parents with kids in college. This credit allows for a maximum credit of $2,500 per eligible student for "qualified tuition and related" expenses. There are some income limitations on whether you can get the credit, but for those who are eligible, any bit helps.
- Mortgage Insurance Premium Deduction - This one is personal for me. This extends through 2016 the ability to take mortgage insurance premiums as an itemized deduction. Since this is my only consolation for having to pay this insurance, I'm glad it got extended.
Other treats in the tax bill include:
- State and local sales tax deduction - permanent
- Child tax credit - parts of the provision permanent
- Earned income credit - parts of the provision permanent
- Teacher's classroom expense deduction - permanent
- Charitable distributions from IRAs - permanent
- Residential energy property credit - extended
- Research tax credit - permanent but modified
- 100% gain exclusion on qualified small business stock - permanent
- Reduced period for S Corporation Built-in Gains tax - permanent
- Work opportunity credit - extended
- Cadillac plans excise - delayed 2 years
The biggest shortcoming in all of this is it didn't do much to make our tax code less complex. I guess that debate will have to be resolved another day. If you have questions on any of these provisions feel free to contact me.
A full copy of the bill can be found here. (I suggest looking at the table of contents to find your favorite tax law provision…. Did I really just say, "favorite tax law?"). You can also search by the name of the bill: "Protecting Americans from the Tax Hikes of 2015" or simply "PATH."