President Obama signs “Protecting Americans from Tax Hikes Act of 2015”

On Friday, December 18, 2015, the President signed into law a significant tax package that will not only affect your tax planning for 2015, but provides clarity as to what tax rules will apply in the future. Below are some of the highlights of the legislation.

Business provisions in the law include:

  • Improved Section 179 deductions.  The new law makes permanent a $500,000 Section 179 expensing limitation ($2,000,000 maximum investment), indexed for inflation (before passage, the limitation was $25,000).
  • The popular 50% bonus depreciation provision has been reinstated for the 2015-2017 tax years.  In 2018, the allowable deduction is 40%; in 2019 the deduction falls to 30%.
  • The R&D tax credit is now permanent.  Additionally, taxpayers with gross receipts under $50 million can utilize the credit against their AMT.  Taxpayers with gross receipts under $5 million can utilize the credit against the employer’s payroll tax liability.
  • The basis provisions related to S corporations making charitable deductions has been permanently extended.
  • The five-year recognition period for built-in gains following conversion from a C corporation to an S corporation has been made permanent.

Individual provisions now made permanent in the law include:

  • Exclusion from income for IRA distributions made directly to a charity for those aged at least 70 ½ years old ($100,000 maximum).
  • The Enhanced Child Care Credit.
  • The American Opportunity Tax Credit.
  • Sales tax deduction in lieu of an income tax deduction.
  • $250 educator deduction.

We are here to assist as you review your tax planning in light of these legislative changes.  Please feel free to contact us at Cray Kaiser if you wish to discuss any of these changes in further detail.