On December 18th President Obama signed into law the long negotiated extender legislation passed by the senate earlier in the day. Under the enacted legislation the tax provisions which expired at the end of 2014 were retroactively reinstated for 2015. Of those reinstated, some were made permanent, while others were extended through either 2019 or 2016. Below are highlights of some of the most prominent of the reinstated provisions.
- Enhanced Child Tax Credit
- American Opportunity Credit
- Reduced Marriage Penalty
- Teacher’s Deduction for Adjusted Gross Income (also indexed for inflation)
- Deduction for State and Local Sales Taxes
- Tax Free Charitable Contributions from Retirement Plans
- Research & Development Credit
- 15 Year Life for Qualified Leasehold, Restaurant, and Retail Improvements
- $500,000/$2,000,000 Section 179 Expensing Limitations (also indexed for inflation)
- 100% Exclusion of Gains on Certain Small Business Stock
- 5 Year Recognition for S corporation Built-In-Gains Tax
Extensions Through 2019
- 50% Bonus Depreciation
- Work Opportunity Credit
Extensions Through 2016
- Personal Residence Discharge of Indebtedness
- Deduction of Qualified Mortgage Insurance Premiums
- Tuition Deduction for Determining Adjusted Gross Income
- Non-Business Energy Credit
The above provisions are only the most prominent sample of the tax provisions included in the over 300 page legislation passed on the 18th. Numerous other components ranging from exempt employer provided mass transit passes to Indian employment credits were also included.
Of equal importance to the extension of many expiring provisions were some of the modifications thereto. Most notable are two R&D credit provisions that greatly expand the credit’s availability beginning in 2016. The first of these is the availability for businesses with less than $50,000,000 in gross receipts to offset alternative minimum tax with the credit. The second is for start up businesses with less than $5,000,000 in gross receipts to use the credit against up to $250,000 of payroll tax. Other modifications include changes such as the removal of the prohibition of electing section 179 treatment for air conditioning and heating units and removal of the prohibition on revoking an election to expense property under section 179.
Should you have any questions on specific provisions of the recent legislation and how it affects your tax situation please feel free to reach out to us for a consultation.
Written by Damien Falato, CPA, MST, CGMA, Tax Director