Legislative Update

Last year the Senate passed the "Tax Increase Prevention Act", this year Congress has come through with the "Protecting Americans from Tax Hikes Act of 2015" (PATH act). Some of the major provisions include: PERMANENT EXTENSIONS

1. The refundable calculation of a potential $1,000 child tax credit is 15% of earned income above a certain threshold. This threshold has been permanently set at $3,000.
2. The American Opportunity Credit, a credit of up to $2,500 for four years of post-secondary education and set to expire in 2017, has been made permanent.
3. Increased income phase-out range and other temporary modifications to the earned income tax credit have been made permanent.
4. School teachers will be guaranteed an above-the-line deduction of up to $250 for eligible expenses. This amount will be indexed for inflation beginning in 2016.
5. In lieu of state income taxes, taxpayers will be able to choose between a deduction for the actual amount of sales tax paid or an amount prescribed by the IRS when itemizing deductions.
6. Rules for contributions of real property for conservation purposes have been permanently extended and enhanced for certain qualifying individuals. Individuals will be able to claim a deduction of up to 50% of their adjusted gross income and carry forward any unused deductions for 15 years.
7. If a taxpayer is at least 70 1/2 years of age, they can continue to exclude from gross income qualified charitable distributions from individual retirements accounts. This exclusion is limited to $100,000 per taxpayer per year.
8. Qualified leasehold improvements will continue to be deducted over 15 years for federal purposes.
9. Section 179 small business expensing limit has been set at $500,000 with a phase-out amount beginning at $2 million. Starting in 2016, these amounts will be indexed for inflation. And beginning in 2015, air conditioning and heating units placed in service will qualify for section 179 expensing.
10. Non-corporate taxpayers may forever exclude 100% of the gain on the sale of qualified small business stock held for more than five years.

PROVISIONS EXTENDED THROUGH 2019

1. The work opportunity tax credit tax been extended and modified to include potential increases in 2016 for the hiring of qualified long-term unemployed individuals.
2. Bonus depreciation is available for property purchased and placed in service from 2015 - 2019. The 50% bonus depreciation will phase down to 40% in 2018 and 30% in 2019.

PROVISIONS EXTENDED THROUGH 2016

1. Discharged debt from a qualified principal residence can be excluded from an individual's 2016 income. If a written agreement is entered into in 2016 but the debt isn't discharged until the following year, it can be excluded from 2017 income.
2. Mortgage insurance premiums can be treated as qualified mortgage interest for an itemized deduction. This deduction phases out for a taxpayer with an adjusted gross income of $100,000.
3. Deductions for qualified tuition and related expense will continue for another year as an above-the-line deduction.

For a more comprehensive list of tax relief provisions, or clarification on any of the above items, contact Lydia Roberts or any of your trusted advisors at HHM, today.