Global Tax Insights
Year End Tax Planning: 6 Tax Extenders Congress Could Renew for 2016November 02, 2015
The Senate Finance Committee approved a bill in July proposing to make around 50 expiring tax extenders permanent—will they all be approved before year end?
As mentioned in our blog “7 Smart Strategies for Year End Tax Planning,” Congress has plans to make a share of tax extenders permanent while others may only be extended through 2016, if at all. Progress has been slow, in fact, the Senate Finance Committee approved a bill back in July proposing to renew 50 recently expired tax provisions. This led many to believe that the bill would be approved soon after to provide taxpayers more time than usual to save on taxes before year-end. Usually Congress holds out right up to year-end to give word on tax extenders, or temporary tax provisions, so right now it is a waiting game - stay tuned for updates!
Which extenders could we see renewed?
Here are a few of Congress’ proposed extensions:
- H.R. 765- The Restaurant and Retail Jobs and Growth Act- This would make the 15 year depreciation schedule for leasehold improvements, restaurant improvements, retail enhancements, and new construction permanent.
- H.R. 2940- The Educator Tax Relief Act of 2015- For teachers who spend their own money on classroom supplies, this would make the $250 above-the-line deduction for applicable expenses permanent while adding a provision to increase the deduction for inflation.
- H.R. 2510- Bonus deprecation- A bill to continue the 50% bonus depreciation allowance for the coming year. Bonus depreciation allows businesses to make an added deduction (after the regular depreciation allowance) of 50% of the cost of qualifying property (most tangible personal property and computer software) in the year in which it is put to use.
- H.R. 1430- the CFC Look-Through Act of 2015 would be permanent if the bill is approved. The “look through rule” uses the foreign personal holding company rules to determine the tax treatment of payments between related controlled foreign corporations (CFCs). Under this rule, dividends, interest, rents, and royalties received or accrued by one CFC from a related CFC are not treated as foreign personal holding company income for tax purposes if they meet certain characteristics.
- Deduction for mortgage insurance premiums- Under this extension, taxpayers will continue to be able to deduct the cost of mortgage insurance on a qualified personal residence (through 2016).
- Above the line deduction for higher education- Under the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), an above the line tax deduction for qualified higher education expenses was created with a maximum deduction of $4,000 for taxpayers with adjusted gross income (AGI) of $65,000 or less, and $2,000 as a max for taxpayers with $80,000 AGI. The bill would extend this deduction through 2016.
Senate Finance Committee leaders are urging Congress to move forward with approving these extenders, but it is unclear whether taxpayers will be allotted some extra time to plan tax-savings around the extenders, or if Congress will pass the extenders at the last second of 2015.
Questions? Contact any member of our Tax Services Team.