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PATH Act: A Quick Guide to What’s Permanent and Extended

February 2016

Rayma J. McRoberts, CPA, Rayma McRoberts, Senior Manager at Weyrich, Cronin & Sorra, Chartered, has over 29 years of public accounting experience. She joined the firm in 2002 as a Manager after a 10-year term at a national firm. Rayma holds a Bachelor of Science Degree in Accounting from Towson University. She is a member of the American Institute of Certified Public Accountants and the Maryland Association of Certified Public Accountants. Rayma is a Board member of the Upper Bay Counseling and Support Services, a member of the Top of the Bay Business Women’s group, and a member of the Havre de Grace, Cecil County and Harford County Chambers of Commerce, a softball coach for Havre de Grace Little League and the Chiefs travel teams. She was a 2013 Cecil County Chamber Athena award nominee and 2014 Baltimore SmartCEO Power Player finalist.

In December of each year tax professionals await the news that Congress has agreed to, and extended expiring tax provisions. This year the news was received mid-December, but with a more favorable outcome. Not only had certain tax provisions been extended, there are some that have been made permanent. This is extremely good news and will give tax professionals and taxpayers alike more certainty when evaluating their annual tax burdens.

On Dec. 18 the Protecting Americans from Tax Hikes Act 2015 (PATH Act) was passed to provide more stability in the tax laws and allow taxpayers to take advantage of these tax relief provisions on their 2015 return.

For individuals, there are several provisions that have been made permanent and a few that are extended through 2016. The permanent tax breaks are:
• Deduction for state and local sales tax in lieu of state and local income tax as an itemized deduction.
• Ability of taxpayers age 70 ½ or older to make a direct tax-free rollover from an IRA to charity
• Small business stock gains exclusion
• The American Opportunity Tax Credit for education
• Child Tax Credit
• Earned Income Credit
• Teachers classroom expense, above-the-line deduction
• Qualified conservation contributions of real property

There are two other individual tax breaks that were extended through 2016, which means they will be revisited again this year. Those are:
• Tuition and fees deduction
• Home debt forgiveness exclusion
• Mortgage insurance premium deduction

For businesses, the provisions are a bit more impactful, and like individuals, some of these provisions are permanent and some are extended through 2019. The permanent tax breaks for businesses are:
• Enhanced Section 179 expensing up to $500,000 of costs, with a $2 million overall investment limit
• Accelerated depreciation for qualified leasehold-improvement, restaurant and retail-improvement property
• Transit benefit parity among transit passes and qualified parking
• Research tax credit
• Reduced recognition period for S Corporation Built-in Gains Tax

There are two other business tax breaks that were extended through 2019, which means they are in play for a few years. Those are:
• Bonus depreciation that allows businesses to deduct additional first year depreciation. This is separate from Section 179.
• The Work Opportunity credit for employers who hire long-term unemployed individuals.

While there are a number of other specific tax extenders, these are the more prevalent and applicable to a wider population.

The permanent nature of many of these provisions is a welcome change and will allow tax professionals and taxpayers the opportunity to make decisions timely and less hasty. Please be sure to check with your tax professional on how these provisions will affect you! Happy tax season! I95

Weyrich, Cronin & Sorra