President Obama Signs PATH Act of 2015

On December 16th an agreement was reached in Congress on extenders and other tax provisions in the “Protecting Americans from Tax Hikes (PATH) Act of 2015.” The bipartisan, bicameral deal makes permanent many of the extenders-i.e., the 50 or so temporary tax provisions that are routinely extended by Congress on a one- or two-year basis and that have been expired since the end of 2014. A number of other extender provisions are extended through 2019, while others are extended for two years through 2016. In addition to the extenders, the PATH Act includes numerous provisions on Real Estate Investment Trusts (REITs), IRS administration, the Tax Court, and miscellaneous other tax rules.

Permanent provisions in the PATH Act (some with modifications) include:

  • the enhanced child tax credit;
  • the enhanced American opportunity tax credit;
  • the enhanced earned income tax credit;
  • the deduction for certain expenses of elementary and secondary school teachers;
  • the deduction of State and local general sales taxes
  • tax-free distributions from individual retirement plans for charitable purposes;
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements;
  • increased expensing limitations and treatment of certain real property as Section 179 property;

New law. The Act retroactively extends and makes permanent the $500,000 expensing limitation and $2 million phase-out amounts. Both the $500,000 and $2 million limits are indexed for inflation. The special rules that allow expensing for computer software is also permanently extended.

Extended provisions in the PATH Act include:

  • 50 percent bonus depreciation for new property acquired and placed in service during 2015 through 2017; 40 percent in 2018 and 30 percent in 2019;
  • mortgage insurance premiums treated as qualified residence interest (for taxpayers with adjusted gross income of $100,000 to $110,000;
  • above-the-line deduction for qualified tuition and related expenses (certain maximum deductions and income limitations apply).

For questions in how these changes might effect your personal tax situation, give our office a call at 817-545-1277.

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