With only two weeks remaining until the end of the year, Congress passed the Protecting Americans from Tax Hike (PATH) Act of 2015, which reinstates a large number of tax provisions that had expired in 2014, many of which were not just renewed, but made permanent, while some of the other provisions are extended through 2016, and in some cases, 2019. This gift from Congress comes just in time for the holidays and will have a significant impact on tax payers and businesses. Below are some of the major provisions worth noting. And because California does not conform to some of these tax breaks, please contact us so we can help with your individual and year-end tax planning.

Highlights of the PATH Act:

  • $622 Billion Tax Break Package
  • Over 100 Separate Provisions
  • Permanent Research Tax Credit, Code Sec. 179 Expensing and AOTC (American Opportunity Tax Credit)
  • Five-Year Extension for Bonus Depreciation
  • Delay of Excise Tax on “Cadillac” Plans
  • Moratorium on Medical Device Excise Tax
  • Overall Major IRS Reform

Permanent Extensions for Individuals

  • Earned income tax credit
  • American Opportunity Tax Credit
  • Child tax credit
  • Option to to deduct state and local sales and use taxes instead of state and local income taxes
  • Teachers classroom expense deductions
  • Charitable distributions for IRAs
  • Qualified Conservation Contributions

Other Non-Permanent Provision Extensions for Individuals

  • Above above-the-line deduction for qualified higher education expenses
  • Mortgage debt exclusion of up to $2 million in mortgage debt forgiveness on a principal residence
  • A deduction for mortgage insurance premiums

Permanent Provisions for Businesses

  • Research and development tax credits
  • The limit for Section 179 deductions increased to $500,000
  • 100% gain exclusion on qualified small business stocks
  • Reduction in S Corporation recognition period to 5 years for built-in gains
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

Extended Provisions for Businesses

  • The Act extends bonus depreciation (additional first-year depreciation) under a phase-down schedule through 2019: at 50 percent for 2015-2017; at 40 percent in 2018; and at 30 percent in 2019.
  • Work Opportunity Tax Credit
  • New Market Tax Credits
  • Look through treatment for CFCs

Energy Extenders

  • The act also extends the Production Tax Credit for wind energy
  • The solar investment tax credit and the credit for qualified residential solar property
  • Through 2016 the deduction for energy-efficient commercial buildings
  • Code Sec. 199 deduction