Permanent Extension of Section 179 Expensing and Modification of Amounts Eligible for Expensing
One of the biggest wins for businesses is the permanent extension of the small business Code Sec. 179 expensing limitation and phase-out amounts in effect from 2010 to 2014 of $500,000 and $2 million, respectively. Both the $500,000 and $2 million limits are indexed for inflation beginning in 2016. For 2015, the limitation and phase-out amounts were slated to be $25,000 and $200,000, respectively.
The special rules that allow expensing for computer software and qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) also are permanently extended.
The bill modifies the expensing limitation by treating air conditioning and heating units placed in service in tax years beginning after 2015 as eligible for expensing. The provision further modifies the expensing limitation with respect to qualified real property by eliminating the $250,000 cap beginning in 2016.
Temporary Extension and Modification of Bonus Depreciation
The bill extends bonus depreciation for property acquired and placed in service during 2015 through 2019 (with an additional year for certain property with a longer production period). The bonus depreciation percentage is 50 percent for property placed in service during 2015, 2016 and 2017 and phases down, with 40 percent in 2018, and 30 percent in 2019.
The bill continues to allow taxpayers to elect to accelerate the use of AMT credits in lieu of bonus depreciation under special rules for property placed in service during 2015. The bill modifies the AMT rules beginning in 2016 by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation. The bill also modifies bonus depreciation to include qualified improvement property and to permit certain trees, vines, and plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted, rather than when placed in service.
Accelerated Depreciation for Business Property on an Indian Reservation. The bill extends accelerated depreciation for qualified Indian reservation property to property placed in service during 2015 or 2016. It also modifies the deduction to permit taxpayers to elect out of the accelerated depreciation rules.
Tax-Free Distributions from Individual Retirement Accounts for Charitable Purposes
The bill permanently extends the ability of individuals at least 70 1/2 years of age to exclude from gross income qualified charitable distributions from individual retirement accounts (IRAs). The exclusion may not exceed $100,000 per taxpayer in any tax year.
Permanent Extension of Enhanced American Opportunity Tax Credit (AOTC)
The Hope Scholarship Credit is a credit of $1,800 (indexed for inflation) for various tuition and related expenses for the first two years of post-secondary education. It phases out for AGI starting at $48,000 (if single) and $96,000 (if married filing jointly). These amounts are also indexed for inflation. The American Opportunity Tax Credit (AOTC) takes those permanent provisions of the Hope Scholarship Credit and increases the credit to $2,500 for four years of post-secondary education, and increases the beginning of the phase-out amounts to $80,000 (single) and $160,000 (married filing jointly) for 2009 to 2017. The bill makes the AOTC permanent.
The bill also prohibits an individual from retroactively claiming the AOTC by amending a return (or filing an original return if he failed to file) for any prior year in which the individual or a student for whom the credit is claimed did not have an individual taxpayer identification number (ITIN). The provision applies to returns, and any amendment or supplement to a return, filed after the date of enactment.
