Tax Breaks Slide in Under the Wire!

December 28, 2015

With less than two weeks to go in 2015, Congress gave both business owners and individual taxpayers a wonderful holiday surprise by passing an important piece of tax legislations. The PATH (Protecting Americans from Tax Hikes) Act, which was signed into law on December 18th, reinstated many important tax breaks that had expired at the end of 2014, making them retroactive to the first of the year. It extended some of the provisions of the original tax extenders legislation for periods of one to several years while making others permanent. In addition, it reduced the tax benefits of certain existing tax breaks while enhancing the effectiveness of others. Although the legislation contains tax benefits for individuals and businesses alike, businesses may well be the overall winner this time.

The following is list of some of the important tax saving measures contained in the PATH Act:

Permanent Tax Breaks:

$500,000 Section 179 expensing limit
Exclusion for small business stock gains
Reduction in gains recognition period for S-Corporations
Research and Development Tax Credit
American Opportunity Tax Credit
Depreciation tax breaks for certain restaurant, retail and leasehold properties
Allowance for tax free food inventory contributions to charity
Allowance for tax free IRA contributions to charity
Provision for itemized deduction of state and local sales taxes
Allowance for deduction of certain teaching expenses
Enhanced Child Care Credit

Tax Breaks Extended through 2016:

Exclusion for forgiveness of mortgage debt
Energy efficiency tax credits
Allowance for deduction of mortgage insurance premiums
Deduction for certain tuition and related educational expenses
Empowerment Zone tax incentives

Tax Breaks Extended through 2019:

Work Opportunity Tax Credit
New Markets Tax Credit
Allowance for 50% bonus depreciation (reduced to 40% in 2018 and 30% in 2019)

While the tax saving opportunities included in the PATH Act are both significant and numerous, the passage of the bill just weeks before the end of the year leaves little time to claim the tax breaks it provides. The tax advantages contained in the bill are retroactive to January 1, 2015 but most require action before the end of the year in order to be included on the 2015 tax return. This means that timing is of the essence. Both businesses and individuals must act swiftly in order to claim the last minute holiday gift given to them by Congress with the passage of this important piece of tax legislation.

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