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How the 2015 PATH Act Could Affect Your 2016 Tax Return

Friday, January 06, 2017

The PATH Act (Protecting Americans from Tax Hikes Act) was passed in late 2015, with many of its provisions becoming effective for tax year 2016. The PATH Act is perhaps, the most significant extender’s bill in recent memory, because it permanently extended several key tax provisions. Permanent tax extenders include the following provisions:

1. The bill makes the expansion of Section 179 permanent- section 179 allows small businesses to immediately deduct up to $500,000 of equipment purchases (new and used equipment).

2. 50% Bonus Depreciation extended through December 31, 2019.  This bill allows small businesses to immediately deduct 50% of equipment purchases (new equipment only).

3. The Child Tax Credit is permanently expanded.

4. The Earned Income Tax Credit is permanently expanded.

5. The American Opportunity Credit is made permanent – allows for an education tax credit up to $2500 for college tuition.

6. Charitable distributions from IRA’s are now permanently tax-free. One of the most popular tax extenders has been a provision allowing seniors over 70 ½ years old to distribute money directly from an IRA to a charitable organization without paying taxes. Because this provision has been renewed several times at the last minute, seniors often have been left scrambling at year end to plan their family finances.

CONTACT CPA JIM HINTZKE TO LEARN ABOUT POSSIBLE TAX BREAKS ON YOUR 2016 TAX RETURN.