A New Bill Has Passed with Important Changes for Individuals and Small Businesses

Tuesday, January 5, 2016

1. $250 above-the-line deduction for qualified out-of-pocket expenses of teachers and other educators is made permanent. The $250 will be indexed for inflation going forward. Starting in 2016 courses for professional development will also be deductible.
2. Computer equipment is now considered a qualified expense for Section 529 Plan distributions.
3. Individuals age 70 ½ and older will be allowed to make tax-free distributions from IRAs (up to $100,000 per taxpayer annually) to qualified charitable organizations.
4. Enhancements to Earned Income Credit including amounts for 3 or more children have been made permanent.
5. Section 179 deductions are now permanent at $500,000.
6. Bonus depreciation is reinstated but being phased out.(50% for 2015-17, 40% in 2018, 30% in 2019)
7. The research and development tax credit has been reinstated and made permanent for amounts paid or incurred after December 31, 2014. For tax years beginning after December 31, 2015, eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax.
8. The Act permanently extends the rule reducing to 5 years (rather than 10 years) the period for which an S corporation must hold it assets following conversion from a C corporation to avoid the tax on built-in gains.

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