In a departure from previous years, Congress passed legislation that permanently extends many expired tax provisions. The so-called “tax extenders” package includes some 50 tax provisions that expired at the end of 2014. The legislation extends all provisions retroactively for 2015, and some of them permanently. Many of the provisions and deductions apply to businesses, but some affect individual investors.
The tax extenders were part of a $1.8 trillion spending and tax package that was signed by President Obama on December 18. The spending bill keeps government operations funded through September 2016.
Here are some of the key provisions of the tax legislation that may interest individual taxpayers:
IRA charitable rollover. This provision allows IRA owners over the age of 70½ to distribute up to $100,000 annually tax-free directly to a qualified charity. This can include required minimum distributions. This provision was extended permanently. For more details see “Donating IRA assets to charity.”
Deduction for state and local sales taxes. This provision allows taxpayers to deduct sales taxes on their federal tax return in lieu of deducting state and local income taxes. This provision may be particularly attractive to those who live in states with sales tax but no income tax such as Florida and Texas.
American Opportunity Tax Credit. This tax credit is extended permanently and provides a credit of up to $2,500 for each eligible student. The credit is not available to taxpayers with more than $80,000 in income, or couples with more than $160,000.
Deduction for qualified tuition payments. This provision is extended for 2015 and 2016 only and allows for a $4,000 deduction for taxpayers whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers), or a $2,000 deduction for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).
In addition, there is a provision included that expands the definition of “qualified higher education expenses” for 529 college savings plans to include computer equipment and technology. Lastly, the law imposes a two-year moratorium on the medical device surtax and postpones the Cadillac excise tax on certain high-benefit health plans until 2020. For more information on all tax provisions included in the legislation, see the House Ways and Means Committee.
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