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Are YOU Protected?

Recently, Congress passed and the President signed into law the Protecting Americans from Tax Hikes Act (PATH) which, among other things, extended a number of popular income tax breaks. In its typical last minute fashion, Congress addressed many of the same tax breaks due to expire this month and which were extended for a single year last year as well as in preceding years. However, a big difference this year is that some of those tax breaks have been made “permanent” so that we will not go through this process again next year.

Among the tax breaks made permanent by PATH are the state and local sales tax deduction, the American Opportunity (education) tax credit, the so-called educator expense deduction for classroom supplies, the enhanced child tax credit, expensing under Section 179, and the direct transfer of funds from an IRA to charity in satisfaction (partial or full, depending on the RMD) of the required minimum distribution for taxpayers required to take a distribution.

Other interesting aspects of the PATH act are the allowance of computer expenses as a qualified expense for Section 529 Plan distributions and the continuation of benefits for employee transportation to and from work, specifically mass transit allowances.

Several tax breaks were not granted permanent status, however, including the deductibility of mortgage insurance premiums, exclusion from income of discharged mortgage debt received in a short sale, and the 50% bonus depreciation rule (the latter extended through 2019, the others only for 2016). These are the highlights of the PATH act, which included other legislation, and may help you plan both for this year and future years. 

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