Last Friday, the Senate passed the tax extender package in a 65-33 vote that was later signed into law by President Obama that day.

The bill costing more than $680 billion over a 10-year period, will help provide reassurance that individuals and businesses won’t be left dealing with uncertainty this time next year, as several of the expired provisions will be extended through 2016, and in some cases permanently.

Permanent Provisions

In total there are 22 provisions that will become permanent under this bill. Below we have highlighted some key provisions that most businesses and individuals have anxiously been awaiting to be extended.

Business Extenders

  • Research and development credit providing a credit for qualified research expenses. Beginning in 2016, the credit will be modified so that eligible businesses with $50 million or less in gross receipts can claim the credit against their alternative minimum tax (AMT) liability.  Additionally, small businesses with less than $5 million in gross receipts can utilize the credit against their payroll tax liability.
  • Increased Section 179 ‘small business’ expensing limits to $500,000 and a $2 million phase-out threshold beginning in 2016, including inflation amounts.
  • 15-year straight-line cost recovery for qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.
  • Reduction in S-corporation recognition period for built-in gains from 10 to five years when following a conversion from a C-corporation.

Individual Extenders

  • Child tax credit will continue permanently at $3,000. Retroactive claims will be prevented by not allowing taxpayers to amend a return or file an original return for any prior year in which the taxpayer or the qualifying child did not have a taxpayer identification number in order to claim the credit.
  • Above-the-line deduction for eligible expenses for elementary and secondary school teachers with a $250 cap indexed for inflation beginning in 2016. Professional development costs are eligible expenses.
  • Individual income tax deductions will be made for state and local sales taxes in lieu of state and local income taxes.
  • Certain tax-free charitable distributions up to $100,000 from individual retirement accounts will be allowed for those who are at least 70 1/2 years old.

Other Provisions

Although not permanent, other provisions will provide taxpayers relief and reassurance through 2016, and in some cases beyond, including:

  • Extended through 2019, bonus deprecation will be extended to allow depreciation of 50 percent of the cost of new property acquired and placed into service from 2015 to 2017; 40 percent in 2018 and 30 percent in 2019. AMT rules are modified beginning in 2016 to increase the amount of unused AMT credits that can be claimed in lieu of bonus deprecation. The provision specifies that certain trees, vines, and fruit or nut plants are eligible for bonus deprecation when planted or grafted, rather than when placed in service.
  • Two-year provisions extended through 2016, includes:
    • A modified exclusion from gross income of discharged of qualified principal residence indebtedness income.
    • Above-the-line deduction for qualified tuition and related higher education expenses up to $4,000. The deduction is limited both by filing status and adjusted gross income.
    • More than 10 energy-related tax incentives, such as energy-efficient new home credit, energy-efficient commercial buildings credit, excise tax credit for alternative fuels and much more.
  • A two-year delay on the 2.3 percent medical device excise tax for sales during 2016 and 2017.


Putting Extenders into Action

Wondering how these tax extenders may affect your year-end tax planning?  There is still time to make adjustments, if needed. Contact Doeren Mayhew’s tax advisors today for assistance in putting these tax incentives to work for you.