In last week’s blog post, we touched on Congress’ “Protecting Americans from Tax Hikes Act of 2015” legislation. Before the legislation was passed, there was fear that some of these tax breaks would be eliminated altogether, lowering the amount of savings for taxpayers. Now, with the revival of dozens of previously-expired tax breaks for individuals and businesses, taxpayers have plenty of options to save money on their taxes. To keep you in the know, we’ve put together a list of some of the major tax breaks that have been revived.
Sales vs. income tax deductions
Good news–taxpayers still have the option to deduct either state and local income taxes or state and local sales taxes. Through the new bill, this tax break has been made permanent and will no longer need to be renewed on a year-by-year basis.
Educators, students and families of both can still benefit from two deductions in particular: the educator expenses deduction and the tuition and fees deduction. The first allows teachers to deduct a maximum of $250 of reimbursed expenses for classroom and school supplies, and luckily for educators, the new bill made this tax break permanent. Meanwhile, the second enables families and individuals to deduct money spent at a college or university, thereby reducing their taxable income by up to $4,000. The tuition tax break was not made permanent, but it has been renewed for 2015-16.
The reduction related to mortgage debt relief provides that individuals who lose their homes to foreclosure are not required to report the remainder of their mortgage as income, meaning they are released from paying taxes on that amount. In turn, the mortgage insurance deduction allows for mortgage insurance premiums to be deducted as part of the mortgage interest deduction, thereby reducing a taxpayer’s taxable income. The new legislation has restored these tax credits for 2015-16.
Charitable distribution deductions
Under this tax break, consumers ages 70½ and older can roll over up to $100,000 to a charity from their IRA and count that donation toward the minimum distribution IRA holders are required to take out after age 70½. Taxpayers who take advantage of this option don’t have to pay taxes on the donated amount, which is a much more tax-efficient strategy than donating cash. As a provision of the new bill, this tax break has been made permanent.
It is important for you as a tax professional to be up to date with the latest tax-related legislation and trends. To learn more about the new legislation and how it impacts tax practitioners, attend our webinar: “Critical Tax Extender Update: Protecting Americans from Tax Hikes Act of 2015 (PROA).”