On December 18, 2015, President Obama signed the Protecting Americans from Tax Hikes Act of 2015. The bill makes permanent a number of business and individual tax incentives that expired at the end of 2014, extends some provisions for five years, and extends a few other provisions through 2016.
The bill is welcome news for taxpayers because it will reduce much of the uncertainty that taxpayers have faced when doing year-end tax planning over the last few years by providing a permanent extension of the enhanced section 179 limitations and a five-year extension of bonus depreciation. The bill is expected to save taxpayers $622 billion over ten years. Below are some of the highlights of the provisions extended as part of the bill.
Provisions that were Permanently Extended:
• Section 179 annual expensing limitation of $500,000, gradually phasing out for taxpayers with more than $2 million in asset acquisitions• Research and experimentation tax credit• Five-year recognition period for S corporation recognized built-in gains (rather than ten years)• Exclusion of all of the gain from the sale of qualified small business stock acquired after December 31, 2014• Tax-free treatment of distributions from retirement plans by individuals age 70-1/2 and older for charitable purposes• 15-year depreciable life for qualified leasehold improvements• Itemized deduction for sales taxes in lieu of state income taxes
Provisions Extended for Five Years
• Bonus depreciation (the bonus depreciation percentage is 50% in 2015, 2016, and 2017; 40% in 2018; and 30% in 2019, with bonus depreciation completely phased out beginning in 2020)• Work opportunity tax credit (expanded to be available with respect to long-term unemployed individuals)
Other Provisions Extended
• Section 179D deduction for the cost of energy efficiency improvements to commercial buildings has been extended through 2016• Solar tax credit has been extended through 2022 with a phase out beginning in 2020• Credits with respect to facilities producing energy from certain renewable sources have been extended through 2016
If you would like to learn more about the new rules, you can read the complete text of the billHERE or the Ways and Means Committee's summary of the bill HERE. Please contact the Goralka Law Firm at (916) 440-8036 if you would like to discuss the new rules and the impact that they will have on your year-end tax planning.