Friday, December 18, 2015

No more annual Section 179 "wait and see". 

The Senate this morning approved a bill that permanently enacts a number of tax provisions that expired at the end of 2014. Other provisions were extended for shorter periods. The House approved it yesterday, so it now goes to the President for signature. The White House has already announced its support for the bill. 

Key provisions to be enacted permanently, retroactive to the beginning of 2015, include, among others:

-The $500,000 Section 179 deduction limit

-The five-year “recognition period” for built-in gains taxes for C corporations electing to be S corporations.

-The ability of IRAs of taxpayers reaching age 70 1/2 to make $100,000 annual charitable contributions that will not be included in the IRA holders income.

-The 100% exclusion for gains on certain original issue C corporation stock held for five years.

-The research credit.

-The alternative deduction for state and local sales taxes.

Other provisions to be made permanent include special breaks for conservation easements and the above-the-line deduction for out-of-pocket educator expenses.

50% bonus depreciation is to be extended from the beginning of 2015 through 2019, along with the Work Opportunity Tax Credit.

To get the Democratic leadership to sign off on the deal, Republican negotiators agreed to make permanent the child tax credit, the enhanced earned income tax credit, and the “American Opportunity Tax Credit” for college costs.

At least 30 other provisions are to be extended through 2016. The credits for biodiesel, renewable diesel, wind energy and residential solar are among these, along with the exclusion for qualified mortgage forgiveness and the above-the-line deduction for qualified college costs. These shorter-lived extenders also include special interest confections such as the 7-year depreciable life for speedways and special film expensing rules. 

There’s more than extenders here. This thing has 233 pages of stuff, much of which has nothing to do with extenders. A few of the major items I note:

-Acceleration of the deadline for filing W-2s with the government to January 31, from the current February 28 deadline for paper copies and March 31 for electronic filers. This is to make it easier to match refund claims to W-2s before refunds are issued. This will be effective for W-2s issued for 2016 wages.

-Allowing the purchase of computers for students as a qualified Section 529 plan expenditure, effective for 2015.

-A new charitable deduction for contributions to “agricultural research organizations.”

-New restrictions on the ability to qualify as a tax-exempt small insurance company.

-A moratorium on the ACA medical device tax.

The annual extenders frenzy is bad tax policy. Now that the most important "temporary" provisions are not so temporary, maybe Congress will take a harder look at some of the special-interest deals remaining in the list of regularly-resurrected provisions.

54 cents. 

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
  • 54 cents per mile for business miles driven, down from 57.5 cents for 2015
  • 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
  • 14 cents per mile driven in service of charitable organizations
The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.
Gas has come down.

Thanks to Joe Kristanson with Roth & Co CPA's for much of the tax info above.