Sarah McCraine, CPA

A little cheer has come early this year, as President Obama has signed into law both permanent and extended tax breaks for individuals and businesses. This expansive bill has been the subject of much debate, as to which provisions would become permanent vs. extended for another year. Listed below are some of the more pertinent tax breaks that individuals and businesses having been hoping would be remain.

Individual Provisions (may be subject to income limitations)

Permanent Provisions

  • Additional Child Tax Credit – In addition to the $1,000 Child Tax Credit, taxpayers with qualifying children will continue to be eligible for up to a 15% refundable credit of earned income in excess of $3,000
  • American Opportunity Tax Credit – The $2,500 credit for four years of post-secondary education
  • Educators – $250 above-the-line deductions for educator’s expenses that will be indexed for inflation
  • Charitable Contributions- the deductions for contributions of real property for conservative purposes and donations up to $100,00 made directly from an IRA for taxpayers who are over 70 ½

Extended Provisions

  • Bonus Depreciation – 50% immediate expensing of assets that have been acquired during the tax year
  • Mortgage Premiums- Qualified mortgage insurance premiums will continued to be treated as deductible mortgage interest
  • Tuition Deduction- Up to $4,000 above-the-line deduction for qualified tuition costs and related expenses for higher education
  • Energy Incentives – $500 credit for purchase of energy efficient property for non- business use.

Business Provisions (may be subject to limitations)

Permanent Provisions

  • R&D Credit – The credit will remain and beginning in 2016 eligible small businesses ($50 million or less in gross receipts) will be able to use the credit to offset AMT liability and the credit will be available for use against certain small business’s employer’s payroll tax liability.
  • Section 179 Deductions- The threshold of up to $500,000 with a phase out beginning at $2 million for the cost of asset acquisitions will remain and now will be indexed for inflation. Air conditioning and heating units placed in service after 2015 will now be eligible for expensing
  • Improvements Depreciation – Qualified leasehold improvement, qualified restaurant property, and qualified retail improvements will remain 15 year straight- line recovery vs. 39 years.

Extended Provisions

  • Bonus Depreciation – 50% immediate expensing of assets that have been acquired during the tax year.

The bill, also included delayed provisions related to the Affordable Care Act (Obamacare). There will be two year delay on the 2.3% excise tax for medical devises. The 40% excise tax on high-cost health plans whose value is greater than $10,200 for individual coverage, also known as the “Cadillac Tax”, will be delayed til 2020.

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