PATH Act Makes Several Key Tax Provisions Permanent
There is nothing like waiting until the last minute to complete a task. We’ve all been there and we all promise we’ll never do it again. Unfortunately (especially when it comes to determining the future of several valuable tax provisions) our government has fallen victim to the same bad habit.
Year after year, Congress promises to address the future of many expired tax provisions, and year after year they fail to make a definitive decision – opting only to pass legislation that extends the provisions for another year. In the meantime, taxpayers are expected to take on the impossible task of navigating the terrain amidst legislative uncertainty. Happily, things are about to change.
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Congress finally made good on its promise to make take a more definitive stance on the future of many popular tax provisions last week when members voted in favor of making many of them permanent. Other tax provisions received a temporary extension. The legislation, Protecting Americans From Tax Hikes Act of 2015 (PATH Act), is retroactive to Jan. 1, 2015, and provides taxpayers a level of certainty that they have been without for quite some time.
This legislation offers a lot of relief to individuals and businesses, alike. Here’s an overview of what you can expect moving forward.
Key Tax Provisions Made Permanent By The PATH Act:
- 15-year recovery period for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
- Extension and modification of the research & development credit, including allowing certain small businesses to claim the credit against AMT liability and employer’s payroll (ie: FICA) liability
- 179 expensing limitations and phase out increased to $500,000 and $2 million respectively
- Exclusion of 100 percent of gain on certain small business stock
- Extension of tax-free distributions from IRAs for charitable purposes
- Earned income tax credit
- Child tax credit
Key Provisions Extended Through 2019
- Extension of the new markets tax credit in which Congress authorized $3.5 billion allocation of credits each year from 2015 until 2019
- Extension and expansion of the work opportunity tax credit
- Bonus depreciation is extended at 50 percent for 2015 through 2017, 40 percent for 2018, and 30 percent for 2019
Key Provisions Extended Through 2016
- Extension and expansion of empowerment zone tax incentives
- Two-year moratorium on the 2.3 percent medical excise tax imposed on the sale of medical devices
- Extension of energy efficient commercial buildings deduction
In addition to the extension of key tax provisions, the PATH act also puts more scrutiny on the operations of the IRS. IRS agents will be held accountable for knowing and acting in accordance with the taxpayer bill of rights and prohibits the use of IRS business for political gain.
The passage of the PATH act is a huge victory for American taxpayers, and will allow them to partner more efficiently and effectively with their tax advisors on key issues in years to come without the uncertainty that has plagued them for many years.
Be sure to set up an appointment to speak with your tax advisor or financial planner to talk about how the PATH act will impact your ability to take advantage of tax planning strategies. Do you have questions about specific aspects of the PATH act? Fill out the form on the top, right side of this page to submit your question to Dear Drebit.
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Tags: business improvements, child tax credit, Congress, earned income tax credit, empowerment zone tax incentives, energy efficient tax deduction, excise tax, gifting IRAs, PATH Act, Permanent Tax Provisions, Research and Development Credit, small business stock, tax credits, tax deductions