McAtee & Associates, CPAS
Back on the PATH Act trail with more details for you to consider ….
Protecting Americans from Tax Hikes (PATH) Act
(Part 2)
Bonus Depreciation
The PATH Act extends bonus depreciation (additional first-year depreciation) for qualified property acquired and placed in service from 2015 through 2019 (through 2020 for certain longer-lived and transportation property). Eligible taxpayers may claim:
- 50% bonus depreciation for qualified property placed in service in 2015-2017
- 40% bonus depreciation for qualified property placed in service in 2018
- 30% bonus depreciation for qualified property placed in service in 2019
The PATH Act also increases the Code Sec. 280F limitation for a passenger auto or light truck or van that is qualified property if the property is placed in service after December 31, 2014, and before January 1, 2018. For an auto or light truck or van placed in service in 2018, the Code Sec. 280F limitation is increased by $6,400. For an auto or light truck or van placed in service in 2019, the Code Sec. 280F limitation is increased is increased by $4,800 [Code Sec. 168(k)(2)]. The PATH Act also provides the following:
- After 2015, the additional first-year depreciation is allowed for qualified improvement property without regard to whether the improvements are property subject to a lease, and there is no requirement that the improvement must be placed in service more than three years after the date the building was first placed in service [Code Sec. 168(k)(3)].
The new law also extends the rule in Code Sec. 168(k)(4), permitting a corporation to increase the AMT limitation by the bonus depreciation amount with respect to certain property placed in service during 2015 if it forgoes bonus depreciation on that property. Beginning in 2016, the new law modifies the AMT rules by increasing the number of unused AMT credits that may be claimed in lieu of bonus depreciation.
Provision Extended through 2019
The PATH Act extends the following through 2019:
- Work Opportunity Tax Credit (WOTC). The PATH Act retroactively extends the WOTC so it applies to eligible veterans and nonveterans who begin work for the employer on or before Dec. 31, 2019 [Code Sec. 51(C)(4)(B)]. The new law also enhances the WOTC for employers that hire certain long-term unemployed individuals.
Provision Extended through 2016
The PATH Act extends through 2016, and in some cases modifies, the following:
- Qualified tuition and related expenses deduction. The PATH Act extends the above-the-line deduction for qualified tuition and fees for post-secondary education [Code Se. 222(e)].
- Mortgage debt exclusion. The PATH Act excludes cancellation of mortgage debt on a principal residence of up to $2 million ($1 million for a married taxpayer filing a separate return from income through 2016.
- Mortgage insurance premium deduction. The new law retroactively extends Code Sec. 163(h)(3)(E) for two years so mortgage insurance premiums paid or accrued before Jan 1, 2017, can be deducted as qualified residence interest.
- Expensing election for costs of film and television production
- Seven-year recovery period for motorsports entertainment complexes
- Three-year recovery period for certain race horses
- Nonbusiness energy property credit
- Alternative-fuel vehicle refueling property
- Credit for two-wheeled plug-in vehicles
- New energy-efficient home credit
- Energy-efficient commercial building deduction
- Credit for fuel cell vehicles
Solar incentives. The FY 2016 omnibus extends the solar investment tax credit and the credit for qualified residential solar property but subjects the credits to phase down. Under the omnibus, both credits will be unavailable after 2021.
Medical devices. The PATH Act imposes a two-year moratorium on the 2.3% excise tax imposed on the sale of medical devices by the manufacturer or importer of the device. Therefore, the tax will not apply to sales during 2016 and 2017.
If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
