According to the U.S. Congress the Protecting Americans from Tax Hikes (also known as the PATH Act) will “grow our economy and help American taxpayers keep more of their hard earned dollars” and serve as a bridge to comprehensive tax reform. This bipartisan bill aims to deliver certainty to American tax payers, prevent tax increases, prevent fraud and abuse and rein in the power of the IRS. Here are some of the provisions of the bill which might affect you or your business.
Tax Relief for Families and Individuals
Several provisions in the bill were designed to provide tax relief for families and individuals. The American Opportunity Tax Credit has been permanently extended to allow a credit of $2500 for four years of post-secondary education.
The PATH Act also provides the permanent option to claim an itemized deduction for state and local general sales tax in lieu of a deduction of state and local income tax.
Mortgage insurance premiums are treated as qualified residence interest but are phased out for taxpayers with an AGI (adjusted gross income) between $100,000 and $110,000 through 2016.
There is a qualified tuition and related expenses deduction of $4,000 for an individual whose AGI does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).
Growth, Jobs, Investment and Innovation
Incentives for growth, jobs, investment and innovation include a permanent extension of the 20% employer wage credit for employees who are active duty members of the uniformed services, and this now applies to employers of any size.
The PATH Act allows for the permanent extension of 15-year straight line cost recovery/depreciation for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
One of the most popular deductions for businesses has been extended, allowing increased depreciation expense of Section 179 properties. Properties include computer software, as well as qualified leasehold improvements, qualified restaurant property and qualified retail improvements. The limit has been increased from $25,000 to $500,000 with a phase-out limit now set at $2,000,000, rather than the previous $200,000. Air conditioning and heating units placed in service beginning in 2015 are also now eligible for expensing.
Some business credits and deductions were extended through 2019. The Work Opportunity Tax Credit extends to employers who hire qualified long-term unemployed individuals (i.e. those who have been unemployed for 27 weeks or more) and increases the credit for employing long-term unemployed individuals to 40% of the first $6,000 of wages paid.
The Bonus Depreciation extension allows bonus depreciation of 50% of property placed in service during 2015-2017 phasing down to 40% in 2018 and then to 30% in 2019.
“The bottom line is this legislation prevents tax increases, creates more job opportunities, and makes it easier for Americans to do their taxes. That’s a great gift, an overdue gift, for American taxpayers and people who want and deserve a stronger U.S. economy.” Kevin Brady, U.S. House Ways and Means Committee Chairman