IT’S OFFICIAL!!! President Obama has signed into law a federal tax bill that was previously passed by Congress. The official name of the bill is the Protecting Americans from Tax Hikes (PATH) Act of 2015 and includes many tax deductions and savings for both the individual and business tax payer.

A majority of the items extended in the PATH Act expired at the end of 2014 and have now been retro-actively extended as of January 1^st, 2015. In addition to the extension made for 2015, the PATH Act has made many of the tax deductions permanent and others have been extended through future years (see below for a detailed breakdown).

Some of the important tax deductions or breaks that have been made permanent beginning January 1^st, 2015 include:
 

• Section 179 Expensing Election – allows small business to expense up to $500,000 with a phase out limitation of $2 million (of total capital asset additions during the tax year). Beginning in 2016, both the expense limit and phase-out will be indexed to inflation
• American Opportunity Tax Credit – provides a tax credit of up to $2,500 for the first four years of post-secondary education
• Tax Free Distributions from IRA accounts – allows individuals to make tax free donations from an Individual Retirement Account to a qualified charity after the age of 70 ½ which will qualify for the require minimum distribution
• 15 Year Recovery Period for Qualified Leasehold Improvements – allows small business to recover modifications for leasehold improvements, restaurant building improvements, and retail improvements straight-line over 15 years.
• Research and Development Credit – provides a tax credit for businesses who incur research and development expenses during the tax year.

Besides the above mentioned permanent extensions, the PATH Act has made the following extension through tax year 2019:
 

• Bonus Depreciation – provides a lump sum depreciation of “new” assets placed in service during the tax year. For tax years 2015 to 2017 the bonus rate is 50%, for 2018 it will be 40%, and in 2019 it will phase out at 30%.
• Work Opportunity Credit – credit to employers who hire unemployed workers. For 2016, the PATH Act modifies the credit to 40% of the first $6,000 of wages provided to long-term unemployed workers (27 weeks or more).

Finally, the PATH Act also provides a few extensions through the 2016 tax year:
 

• Qualified Tuition and Fees Deduction – provides individuals with higher AGIs a front page deduction for qualified tuitions and fees paid to an eligible institution
• Mortgage Debt Forgiveness Exclusion – provides exclusion of discharge of indebtedness for your principal residence from your gross income.

Elek & Noss CPAs is available to answer any of your questions regarding the new PATH Act and how it will affect your 2015 and future year tax returns. You can reach us by phone at 440-926-9300.