Tax Law Changes for TY 2016 – Part 1

The Protecting Americans from Tax Hikes (PATH) Act of 2015 was passed by Congress and signed by President Obama on Dec. 18, 2015. This tax law change extended a number of expired tax breaks. Almost half of the provisions were extended permanently, and the remaining provisions were extended for at least one year. Typically, tax extenders are voted on by Congress every year or two. About 11 million tax filers claimed one or more of these tax extender benefits when filing a tax return in the past. The following list recaps the provisions that were extended.

Permanent Extensions

Tax Relief for Families and Individuals

• Enhanced American Opportunity Tax Credit
• Enhanced Earned Income Tax Credit
• Extension and modification of deduction for certain expenses of elementary and secondary school teachers
• Extension of deduction of state and local general sales taxes
• Extension of parity for exclusion from income for employer-provided mass transit and parking benefits

Incentives for Charitable Giving

• Extension of tax-free distributions from individual retirement plans for charitable purposes
• Extension and modification of special rule for contributions of capital gain real property made for conservation purposes
• Extension and modification of charitable deduction for contributions of food inventory
• Extension of basis adjustment to stock of S corporations making charitable contributions of property

Incentives for Growth, Jobs, Investment and Innovation

• Extension and modification of increased expensing limitations ($500,000) and treatment of certain real property as Sec. 179 property
• Extension of 15-year straight-line cost recovery for leasehold improvements, restaurant buildings and improvements, and retail improvements
• Extension and modification of research credit
• Extension of exclusion of 100 percent of gain on certain small business stock
• Extension of reduction in S corporation recognition period for built-in gains tax
• Extension and modification of employer wage credit for employees who are active duty members of the uniformed services

Extensions through 2019

• Extension and modification of bonus depreciation (50 percent through 2017)
• Extension of New Markets Tax Credit

Extensions through 2016

Tax Relief for Families and Individuals

• Extension of above-the-line deduction for qualified tuition and related expenses
• Extension and modification of exclusion from gross income of discharge of qualified principal residence indebtedness
• Extension of mortgage insurance premiums treated as qualified residence interest

Incentives for Growth, Jobs, Investment and Innovation

• Extension and modification of empowerment zone tax incentives
• Extension of Indian Employment Credit
• Extension and modification of accelerated depreciation for business property on an Indian reservation
• Extension and modification of Qualified Railroad Track Maintenance Credit
• Extension of Mine Rescue Team Training Credit
• Extension of Qualified Zone Academy Bonds
• Extension of special expensing rules for certain film and television productions
• Moratorium on Medical Device Excise Tax

Incentives for Energy Production and Conservation

• Extension and modification of credit for nonbusiness energy property
• Extension of credit for energy-efficient new homes
• Extension of credit for two-wheeled plug-in electric vehicles
• Extension and modification of credits with respect to facilities producing energy from certain renewable resources

Residential Energy Efficient Property Credit (REEP)

For 2016, the REEP credit can be claimed for 30 percent of the cost of each of following: Solar electric property, solar water heating property, fuel cell property, small wind energy property and geothermal heat pump property.

This credit was scheduled to expire for property placed in service after Dec. 31, 2016. It was extended through 2021 for solar electric property expenditures and solar water heating property expenditures. The credit percentage drops from 30 percent to 26 percent for property placed in service in 2020, and to 22 percent for property placed in service in 2021. Credits for fuel cell property, wind energy property and geothermal heat pump property expire for property placed in service after 2016.

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