UHY LLP Reports: President Obama Signs Tax Extenders Bill Impacting 2015 Taxes for Businesses and Individuals

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The Protecting Americans from Tax Hikes Act retroactively extends many of the tax provisions that had expired at the end of 2014

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Just recently, President Obama signed into law the Protecting Americans from Tax Hikes Act, which retroactively extends many of the tax provisions that had expired at the end of 2014. Rather than continuously extend many of the provisions on an annual basis, Congress elected to make certain provisions within the Act permanent extensions, while many other provisions within the Act were extended for more than one year. The retroactive enactment of this legislation will impact the 2015 taxes for many individuals and businesses.
Among the key provisions that are extended in the Protecting Americans from Tax Hikes (PATH) Act of 2015 are:

INDIVIDUAL PROVISIONS

Permanent Extensions:

  •     Deduction for sales and use tax in lieu of state income taxes
  •     Tax free treatment of distributions from IRA’s where the distributions are donated to charity
  •     The American Opportunity Tax Credit
  •     Above the line deduction for educator expenses of up to $250

Other Extensions:

  •     Mortgage Insurance Premium Deduction for premiums paid or accrued during the tax year was extended through 2016
  •     Exclusion from income arising from the discharge of qualified principal residence indebtedness was extended through 2016
  •     The above the line deduction for qualified tuition is extended through 2016

BUSINESS PROVISIONS

Permanent Extensions:

  •     Research and development credit –
  •     Besides making the research and development (R&D) credit permanent, there are also other provisions regarding the R&D credit within the Act that may benefit taxpayers:
  •     For tax years beginning after 2015, eligible small businesses may use the R&D credit to offset both regular and AMT taxes.
  •     For tax years beginning after 2015, qualified small businesses may use a portion of the R&D credit against payroll taxes that the business may otherwise owe.
  •     15 year recovery period for qualified leasehold improvement property, restaurant property, and retail improvement property
  •     Section 179 expensing of up to $500,000 of qualifying property is permanently extended. The dollar amounts will also be indexed for inflation in the future. The Act also expands the property eligible for Section 179 to now include air conditioning units and heating units.
  •     Reduction in period in which an S-corporation may be subject to built-in gains tax to 5 years from 10 years
  •     100% exclusion of the gain on certain small business stock

Other Extensions:

  •     Work Opportunity Tax Credit is extended through December 31, 2019. This credit will also apply to a new targeted group, individuals who are long-term unemployment recipients.
  •     Bonus Depreciation on qualifying property placed in service before January 1, 2020, subject to phase-outs; 50% bonus depreciation for property placed in service in 2014 through 2017, 40% bonus depreciation for property placed in service in 2018, 30% bonus depreciation for property placed in service in 2019.
  •     The Act relaxes the rules related to bonus depreciation related to qualified leasehold improvements. Under the new law, qualified leasehold improvements are no longer a listed category of assets eligible for bonus depreciation. Instead a new category has been added which is qualified improvement property. Qualified improvement property is an improvement to an interior of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service. There is no longer a requirement that the improvements be subject to a lease, nor that they be done more than three years after the date the building was first placed in service.

ENERGY – RELATED PROVISIONS

  •     the nonbusiness energy property credit for certain energy-efficient improvements to the taxpayer's main home; extended through 2016;
  •     the credit for alternative fuel vehicle refueling property; extended through 2016;
  •     the credit for two-wheeled plug-in electric vehicles; extended through 2016;
  •     the second generation biofuel producer credit (formerly cellulosic biofuels producer tax credit); extended through 2016;
  •     the incentives for biodiesel and renewable diesel; extended through 2016;
  •     the renewable electricity production credit, and the election to claim the energy credit in lieu of the renewable electricity production credit (except with respect to wind facilities); extended through 2016;
  •     the credit for construction of energy efficient new homes; extended through 2016;
  •     second generation biofuels bonus depreciation; extended through 2016;
  •     the energy efficient commercial buildings deduction; extended through 2016;
  •     the incentives for alternative fuel and alternative fuel mixtures through 2016; and
  •     the credit for new qualified fuel cell motor vehicles; extended through 2016.

The permanent and annual extensions provided in the Protecting Americans from Tax Hikes Act will be very helpful as you plan your business and personal finances. These provisions will provide more certainty in the important decisions you make in the future.

For more information on this act or how these tax breaks can apply to you or your business, contact your professional at UHY LLP in Detroit 313 964 1040, Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040, or you can visit us on the web at http://www.uhy-us.com

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Chris Clark
UHY LLP
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