For a Summary Infographic of the new PATH tax law, click here.
Protecting Americans from Tax Hikes (PATH) is a new tax law for 2015 that also affects tax laws for 2016 and beyond. PATH is required reading before filing taxes for small business owners.
This bill made 22 provisions permanent, 4 provisions extended through 2019, and 30 provisions extended through 2016.
Items Made Permanent
Items Affecting Individual Taxpayers
- Child Tax Credit
- Stays at $1000 per child
- The additional child tax credit stays refundable at the same level.
- American Opportunity Credit
- Available for the first four years of college
- 100% of first $2,000, 25% of next $2,000
- Earned Income Credit
- Teachers deduction
- Deduct up to $250 ($500 if both qualify) only for K-12 grades
- Must work 900 hours per year as teacher, instructor, counselor, or principal and aides
- Will be indexed for inflation as well after 2015.
- Available for professional development after 2015.
- Deduction for sales tax
- Tax-Free Transfer from IRA to Charity
- Nice tool to use if you are over 70 ½ and donate to charities!
- Reduces Adjusted Gross Income (AGI) (making the amount of SS that is taxable less is some cases, also reduces the threshold for medical deductions)
- Can take even if you do not itemize
- Not limited to 50% of income
- Can benefit a lot of taxpayers
- Have to be over 70 ½
- Counts towards Required Minimum Distribution (RMD)
- Max of $100,000
Items Affecting Business Taxpayers
- Donations of Food Inventory
- Inventory must be from business
- Food must be wholesome
- Must be used to care for ill, needy, or infants
- Non-Profit Organization receiving the donated food must not sell it
- Must receive statement from organization
- Deduct more than the cost basis of food donated. (cost plus ½ of difference between cost and Fair Market Value (FMV), based on limitations)
- Basis adjustments S Corp Donations
- Research Tax Credits
- Differential Pay Tax Credits
- Available to employers who subsidize wage of military personnel
- 20% on max wages of $20,000
- Applies to all employers after 2015. Before 2015, it’s only for employers with less than 50 employees.
- 15-year life for improvements to leasehold, restaurant, and retail space.
- Increase Section 179 Depreciation to $500,000.
- Available to Qualified real property (leasehold improvement, restaurant property, retail improvement property)
- Max on real property is $250,000 in 2015 with no carryover allowed. Changes to $500,000 with no carryover limitation starting in 2016.
- A/C and Heating units after 2015 are now eligible.
- Exclude 100% gain on small business stock (C Corp)
- 5 year holding period for Built-in Gains Tax
Items Extended Through 2019:
- New Markets Credit
- Work Opportunity Credit
- Bonus Depreciation: Phased out starting in 2017-50%, 2018-40%, 2019-30>#/li###
Items Extended Through 2016:
- Forgiveness from debt relief principal residence
- Deduction for mortgage insurance premiums
- Deduction for qualified tuition and related expenses (Tuition and Fees Deduction)
- Moratorium on medical device excise tax
- Credit for non-business energy property
- Credit for two-wheel electric vehicles
- Builders credit for energy efficient homes
- Deduction for energy efficient commercial buildings
- Indian Employment Credit
- Domestic Production Activity Deduction for Puerto Rico
- Empowerment Zone Tax Breaks
- Railroad Track Maintenance Credit
- Rum Excise tax breaks for the Virgin Islands and Puerto Rico
- Tax possessions tax credit for American Samoa
We Are Here To Help
Our Oklahoma City CPAs and Tulsa CPAs help your lower your small business taxes. Contact or call our offices in Oklahoma City: 405-720-1244 or Tulsa: 918-477-7650 to find out more how we can serve your small business. Let our experts help you with any of you bookkeeping, payroll or tax needs.