With the passage of the Protecting Americans from Tax Hikes Act of 2015, the U.S. House of Representatives has ended what some consider a tradition. Some of us will miss the annual end-of-year suspense, the “will they or won’t they” final moments of each December that we have all become used to as lawmakers deliberate the fate of dozens of tax extenders.
Will my charitable distribution tax break gamble pay off? Will I be able to write off all the supplies I purchased for my class of second graders? The PATH Act answers these and other questions from taxpayers once and for all. Well, at least until the law changes. Still, for the time being, popular credits and deductions have gained permanent status in the tax code.
Some highlights of the bill: Individual retirement accountholders age 70-1/2 and older may now donate up to $100,000 of their IRA assets to one or more charities every year in order to meet their annual withdrawal requirements. The donations do not qualify as deductions, but they do reduce the accountholder’s taxable income. The PATH Act covers charitable transfers made all the way back to January and up to Dec. 31.
The IRS will continue to allow taxpayers to deduct sales tax payments rather than state and local income taxes on their federal returns. And, the American Opportunity Tax credit will not expire at the end of 2017 as planned. For more information about these two items, see our posts from November and September about the sales and use taxes and the AOTC, respectively.
There are changes to 529 education savings plans, as well. Significantly, the plans can be used to pay for computer equipment and other technology needed for school. Also, tuition refunds can be deposited back into the 529 account (within 60 days of withdrawal).
And, yes, the educator expense deduction will not only remain in place, but it will also include professional development costs — and it is now indexed for inflation.
Taxpayers may appreciate the economic benefits of the PATH Act, but they may actually rejoice at one particular provision. The IRS will receive an additional $290 million in funding in 2016 that is specifically earmarked for identity theft, cyber security and, yes, customer service.
As always, if you are looking for help with your own personal or business tax situation, we urge you to consult with an experienced tax attorney.
The Wall Street Journal, “Congress Gives Americans a Tax Gift for Christmas ,” Laura Saunders, Dec. 18, 2015
Accounting Today, “Congress Makes Some Tax Extenders Permanent,” Michael Cohn, Dec. 16, 2015