“Take a look at the list of the provisions included in the Protecting Americans from Tax Hikes Act of 2015- the PATH Act and the Omnibus Bill.”
Each year, the Congress passes a year-end legislative package that enables tax provisions. This year, the Protecting Americans from Tax Hikes Act of 2015- the PATH Act and the Omnibus Bill include both permanent and temporary extensions of tax provisions, which may provide an estimated $680 billion tax breaks to individuals and corporations.
Here is a quick summary of tax breaks that were included in this year’s package
Some of the credits were made permanent after years of temporary extensions. Here is a list of four major credits that are now here to stay.
- R&D Tax Credit: Beginning after 2015, businesses with average annual gross receipts of $50 million or less would be allowed to use the credits to offset the alternative minimum tax (AMT) liability. Also startup companies with gross receipts of less than $5 million would be allowed to offset their payroll tax liability with the research credit.
- IRC Sec. 179 Expensing: A taxpayer may treat the cost of any section 179 properties (tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business) as an expense that is not chargeable to capital account. The aggregate cost of $500,000 shall be allowed as a deduction for the taxable year unless the amount by which the cost of section 179 property placed in service exceeds $2 million.
- American Opportunity Tax Credit: Up to $2,500 of educational expenses can be tax deductible; however, the limitation applies to single taxpayers with the income of $80,000 or over and married couples with a joint income of $160,000 or more.
- Child Tax Credit: The Child Tax Credit can now reduce the tax bill by as much as $1,000 per child if you meet seven requirements-
- Age Test
- Relationship Test
- Support Test
- Dependent Test
- Citizenship Test
- Residence Test
- Family Income Test
- Work Opportunity Tax Credit: 40 percent of the wages paid (up to $9,600) to a first year employee who begins work after 2014 and before 2020 can be tax deductible. Additionally, beginning in 2016, a new category of employees will qualify: “individuals who have been unemployed at the time they begin work for at least 27 consecutive weeks, who have received federal or state unemployment compensation for a portion of that period.”
- Bonus Depreciation: Businesses, regardless of the size, can depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016, and 2017. Then the percentage of bonus depreciation decreases to 40 percent in 2018 and to 30 percent in 2019.
- Production Tax Credit: For facilities producing certain renewable sources of electricity can apply to deduct a part of its production cost.
- Investment Tax Credit: The Omnibus Bill also includes long-term extensions to wind and solar tax credits. The credit amount is decided by the year of the construction.
- If construction begins before Jan 1, 2017- no reduction
- If construction begins after Dec 31, 2016 and before Jan 1, 2018- 20 percent reduction
- If construction begins after Dec 31, 2017 and before Jan 1, 2019- 40 percent reduction
- If construction begins after Dec 31, 2018 and before Jan 1, 2020- 60 percent reduction
Other Minor Extensions
- Tax-free distributions from individual retirement accounts (IRAs)
- Deductions for mortgage interest premiums
- Medical Device Excise Tax
- Real Estate Investment Trust
The new bill now provides a revised set of tax breaks and deductions to both individual and corporate taxpayers. It is advised for all taxpayers to explore different options with tax experts to maximize the credit opportunity. For more information, contact us through contact information provided below.