For individual taxpayers
- Tax deduction for state and local sales tax in lieu of state and local income tax (extended permanently)
- American Opportunity Tax Credit for higher education costs (extended permanently) – Taxpayers meeting certain income criteria may deduct up to $2,500 in education expenses.
- Tax-free charitable distributions from IRAs of taxpayers age 70½ (extended permanently) – Taxpayers age 70½ or older may exclude up to $100,000 from gross income if the IRA distributions were paid directly to qualified charities.
- Small business stock gains exclusion (extended permanently) – The Act makes permanent the exclusion of 100% of the gain on small business stock under IRC Section 1202 (Act Section 126) held for at least five years by non-corporate taxpayers. Thus, qualifying stock purchased on or after September 28, 2010, will qualify for the 100% exclusion. Qualifying stock acquired after February 17, 2009, and on or before September 27, 2010, may be eligible for a 75% exclusion from Federal capital gains tax and a 50% exclusion if acquired after August 10, 1993, and on or before February 17, 2009.
- Home debt forgiveness exclusion (extended through 2016) – Taxpayers are allowed to exclude from income cancellation of mortgage debt on a principal residence of up to $2 million.
- Teachers’ classroom expense above-the-line deduction was extended permanently. The current ceiling amount of $250 will be indexed to inflation beginning in 2016.
- The Act also delayed imposing the Affordable Care Act excise tax on high-dollar health care plans (the Cadillac plans) for two years after December 31, 2019.
For business taxpayers
- Bonus depreciation extended through 2019 – 50% for 2015-2017, 40% in 2018, and 30% in 2019.
- Section 179 business expensing limitation of $500,000 and beginning phase-out amount of $2 million for the acquisition of qualified property extended permanently.
- Accelerated depreciation for qualified leasehold-improvement, restaurant, and retail-improvement property extended permanently.
- A five-year recognition period for built-in gains tax following conversion from a C to an S corporation was made permanent.
- The research and development tax credit was extended permanently and with an increased credit from 14% to 20%.
- The Work Opportunity credit extended through 2019 – Employers may claim up to $9,600 credit per qualified employee hired, including veterans.
- New Market Tax Credit provides taxpayers with $3.5 billion of Federal tax credits every year through 2019 for investing in businesses located in qualified low-income communities.
For both individuals and business taxpayers
- Code Sec. 25C Residential Energy Property credit extended through 2016. The credit provides up to 10% of qualifying expenses with a maximum of $500.
- The solar investment tax credit and the credit for the qualified residential solar property were extended through 2021.
- Credit for energy-efficient new homes and deduction for energy-efficient commercial buildings were both extended through 2016.
In addition to the above discussed, many tax breaks with more limited applicability have also been extended under the PATH Act. Please do not hesitate to contact me for detailed analysis if you have any questions regarding the Act.