A Retrospect of 2015 Tax Year

For most taxpayers, 2015 was a particularly eventful year for tax developments especially towards the end of the year. There were two bills that were eventually passed which primarily affected individuals and businesses in a major way. The Consolidated Appropriations Act and the Preventing Americans from Tax Hikes Act, PATH Act, both signed into law by President Barack Obama on December 18, 2015 included a number of major tax changes. The Appropriations Act included a delay in the so-called “Cadillac” tax, a one-year suspension of the annual fee paid by health insurance providers and an extension of the wind and solar energy credits. The PATH Act, apart from its broad tax overhaul to keep more tax dollars in Americans pockets, included a retroactive extension of the 50 or more tax-favorable extenders, some made permanent, others had an expiring date into 2019 and others in 2017, to provide relief for families and individuals. Congress chose to make permanent those extenders that provide a more significant impact on businesses and individuals alike. For tax purposes and interests alike, this retrospect will only focus on the tax impact the PATH Act will have on taxpayers.

For individuals, the most notable extenders made permanent include:

  • Enhanced American Opportunity Credit, which provides up to $2,500 in education credits
  • Enhanced Child Tax Credit
  • Enhanced Earned Income Credit
  • Educator expenses for elementary and secondary school teachers up to $250
  • State and Local general sales tax deduction in lieu of state and local income taxes
  • Employer provided mass transit and parking benefits for parity excluded from income
  • Full deduction for charitable donations of capital gain real property for conservation purposes
  • Charitable distributions from IRAs of up to $100,000 excluded from gross income

For businesses, the most notable extenders made permanent are;

  • The research credit
  • 20 percent employer wage credit for employees called to active duty
  • Straight line cost recovery for leasehold improvements, restaurant and retail improvements
  • Section 179 expense and threshold dollar amounts to $500,000 and $2,000,000 respectively
  • 100 percent exclusion of gain of certain small business stock of non-corporate taxpayers
  • Pass-through character of interest-related dividends of Regulated Investment companies, RICs
  • Low-income housing credits of the nine percent minimum credit rate

Extensions through 2019 include:

  • Extension of New market credits of up to $3.5 billion from 2015 through 2019
  • Extension and modification of the Work Opportunity credit to 40 percent of $6000 in wages
  • Extension and modification of the bonus depreciation from 2015 through 2019
  • Payments between related controlled foreign corporations under personal holding companies

Extensions through 2016 include:

  • Cancellation of debt from qualified principal residence
  • Qualified mortgage insurance premiums treated as qualified residence interest
  • Qualified tuition an related expenses
  • Classification of certain race horses as 3-year property
  • Special expensing rules of film, television and theater production deduction
  • 2-year moratorium on 2.3 percent excise tax on sale of medical devices

For more information on the PATH Act and its integrity on taxpayers, click here