Congress, the Senate and the President finally got together to pass the Tax Extender bill. Some provisions were made permanent (thank goodness), some extended again and some things went away. Here’s a summary of the items that are most likely going to affect you.
You can now rollover 401 ( k) money into a SIMPLE IRA plan. The SIMPLE IRA is often a favorite with self-employed people as it allows you to put more money in a pension than a straight IRA. Being able to also rollover into a SIMPLE, will actually make your pension planning simpler.
Tax Changes for Parents
You can now use Section 529 plans (tax sheltered plans for your kids’ college) to buy computers for your kids when they go away to college.
This Bill opened up the ABLE accounts for parents of disabled children. With this change, you can now select an ABLE account offered by any state. You’re not just stuck with your own home state.
The child tax credit ($1,000) has been made permanent. It phases out if your income is over $75,000 (single) or $110,000 (married, filing jointly).
Home Tax Changes
For one more year, you can write off PMI premiums on your primary residence. You can’t write the cost off on a second home or if your income is over $110K.
Education Tax Changes
You can take a tax deduction for up to $4K for college tuition and fees for just this year, unless they extend it again.
The American Opportunity Tax Credit (Hope Credit) was due to expire at the end of 2017. It’s now been made permanent. This provides a credit of up to $2,500 provided your AGI is under $80K (single) or $160K (married filing jointly).
Itemized Tax Deduction Changes
The tax break that allows you to itemize either the state income taxes you paid or the sales tax you paid has been made permanent.
Employer Tax Changes
Starting in 2016, there is a new $2,400 tax credit for hiring long-term unemployed.
The “Cadillac tax” on luxury employer sponsored health insurance has been delayed until 2020.
Small Business Tax Changes
The R & D tax credit has been made permanent!
The Section 179 deduction has been now made permanent at up to $500,000.
Bonus depreciation is back, at least for awhile. In 2015, 2016 and 2017, you can take 50% of depreciation for new equipment up front. In 2018 it drops to 40%, 30% in 2019 and then goes away.
Restaurants and retailers are allowed to depreciate leasehold improvements over 15 years (instead of normal 39 years). This is now a permanent provision.
They didn’t give you must time for year-end tax planning, but at least it’s good news for the most part!