In December of 2015, Congress passed the Protecting Americans from Tax Hikes Act (PATH Act).

Under this new law, many tax extenders were made permanent. Tax extenders are popular but traditionally temporary tax breaks. Congress has had a pattern the last several years of extending certain tax provisions for only a one year time frame. This, frankly, has let to outrage in the tax profession because planning becomes nearly impossible when you don’t know what the law is going to be. To make matters worse, Congress often waited until the last minute (as it has done this year) to pass legislation which retroactively changes the law going back to January 1st.

Under the PATH Act many of these annually expiring provisions which expired on 12/31/2014 have been made permanent.

Highlights include:

  1. The American Opportunity Tax Credit has been made permanent.
  2. The Section 179 tax deduction threshold of $500,000 for immediate tax write-off of fixed asset purchases has been made permanent.
  3. The reduced earnings threshold for the Child Tax Credit has been made permanent.
  4. The teachers’ classroom expense deduction for teachers who purchase school supplies up to $250 has been made permanent.
  5. The tax free distribution from an IRA for charitable purposes for individuals over 70.5 (capped at 100k a year) has been made permanent.
  6. The 15 year recovery period for qualified leasehold improvements, qualified restaurant improvements and qualified retail improvements has been made permanent.

Other common temporary provisions were not permanently extended but did make it into law in 2016 including:

  1. An extension of phased down bonus depreciation thru 2019.
  2. Exclusion from gross income for discharges of indebtedness on principal residences occurring before 1/1/17.
  3. Certain energy efficiency provisions were extended for 2016 and some beyond 2016.

If you have any questions about a particular provision or tax break, please call or email me.