Just before Christmas, Congress passed the “Protecting Americans from Tax Hikes” (PATH) Act of 2015. This bill retroactively restored several tax provisions for 2015. Of course, it would have been better if it had arrived earlier in the year – like a Valentine’s Day gift so we could have used it for tax planning all year long. But at least, it happened and the best surprise of all, is that some of the provisions are even permanent so we won’t have to go through this indecision again next year!! It’s the gift that keeps on giving!
So what was included in this present? Just unwrap it and see. Here are some of the highlights of the bill.
Sec 179 Expensing – One of the provisions permanently extended was Sec 179 expensing which was increased from $25,000 to $500,000. Code Sec. 179 expensing is the provision that allows a business to purchase assets and instead of depreciating the asset over its life, it can be fully expensed in the year it is placed in service. Businesses are able to purchase up to $2 million in assets before the Sec 179 begins to phase out.
Bonus Depreciation – A Bonus depreciation is an additional amount of deductible depreciation that is awarded above and beyond what would normally be available. With the new enactment, it is temporarily extended to 50% for qualified new property that is placed in service in 2015 through 2017. The bonus depreciation drops to 40% for 2018 and 30% for 2019. Bonus depreciation is especially helpful if a business doesn’t have taxable income and cannot use the Sec 179 provision.
Research and Development (R&D) Tax Credit – The R&D Tax Credit is restored for 2015 and made permanent going forward. Beginning in 2016, it is available to offset alternative minimum tax (AMT) as well as regular tax liabilities for small businesses. Also, in 2016, startup businesses may use the credit to offset up to $250,000 of employer FICA taxes.
Some of the permanent changes that affect individual tax returns include:
- The enhanced Child Tax Credit
- The enhanced American Opportunity Tax Credit
- The deduction for expenses of teachers
- The deduction of state and local sales taxes
- Tax-free distributions from IRA’s for charitable purposes
I hope one or more of these provisions were something that you had on your Christmas list! And it doesn’t matter if you’ve been naughty or nice, these provisions are for everyone! If you need more information on any of these provisions or have questions regarding the PATH Act, please contact us.
Happy New Year!
A little more about us:
Located in West Des Moines, Iowa with a branch office in Winterset, Iowa, McGowen, Hurst, Clark & Smith, P.C. celebrates 65 years of extending excellent service to our clients, providing them with accounting, auditing, consulting and investment expertise.
Established in 1946, our staff has grown from 3 to 60 employees, making us large enough to provide our clients with a broad base of experience and resources, yet small enough to offer very personalized service—which we feel makes us stand apart from other CPA firms. In addition to the traditional services of Accounting, Tax Preparation, Audit and Business Consulting, MHC&S offers our clients specialized services including Estate Planning, Business Valuations, Cost Segregation Studies, Retirement Planning, QuickBooks Training, Financial Advisory Services, Fraud Detection and Deterrence, Business Succession Planning, Litigation Support and more.
MHC&S is a member of CPAmerica International, Inc., a national association of accounting firms offering membership to only 90 firms throughout the United States. This association offers a wide pool of additional technical expertise to the members firms, as well as continuing professional education necessary to maintain the degree of excellence which MHC&S feels is vital in today’s business environment.