In mid-December 2015, President Obama signed a massive spending and tax bill into law. The tax bill made permanent some of the “Tax Extenders” (so called because these provisions have lapsed and been reinstated in recent years) and extended certain others past 2015. Here are a few highlights of the Protecting Americans from Tax Hikes Act of 2015:
Extenders Made Permanent:
- Qualified Charitable Distributions from IRA to Charities
Taxpayers over age 70 ½ are permitted to make a “Qualified Charitable Distribution” of up to $100,000 directly from an IRA to a charity. This contribution cannot be claimed as a tax deduction, but is not taxed in income and counts towards the taxpayer’s Required Minimum Distribution obligations.
- State and Local Sales tax deducts – only for folks living in states with no income taxes
Taxpayers are allowed to deduct either the payment of state income taxes or the payment of state sales taxes instead. For taxpayers living in the seven states with no income tax, this is a valuable opportunity to increase deductions.
- Enhanced Opportunity tax credit
Taxpayers may receive a credit of $2,500/year for up to four years of post-secondary education. The income phase out threshold for married couples is an AGI of $160,000 and for individuals is $80,000.
- Schoolteacher Expense deduction
Elementary and secondary school teachers are eligible to deduct up to $250 of unreimbursed expenses for classroom supplies and professional development expenses. This amount will increase yearly for inflation starting in 2016.
- 529 Plans
In addition to current expenses like tuition, books, fees and lodging, the bill adds computer equipment and technology as qualified expenses.
In situations where a 529 plan distribution is used to pay collegetuition and is subsequently refunded and thus not actually used for college, the new rules permit such amounts to be re-contributed (i.e. “roll over”) back to the 529 account within 60 days.
Extended past 2015:
- Excluding discharged mortgage debt from income
Homeowners who negotiate a reduction in the balance of a mortgage will be allowed to exclude the forgiven amount from their income through 2016.
- Deduction of Mortgage insurance premiums
Homeowners with an Adjusted Gross Income of less than $110,000 are still able to deduct their mortgage insurance premiums along with their mortgage interest payments through the end of 2016.