Highlights of the PATH Act

January 01, 2016 by Karen Reed, EA
Tax Break written on a note

With just days to go before the end of the year, Congress extended many of the tax breaks that were set to expire at the end of 2015 as well as expanded a number of other tax provisions. Some important new rules to be aware of this year include:

Individual Tax Provisions Made Permanent

  • State and local sales tax deduction: The state and local sales tax deduction can be taken in lieu of the state income tax deduction. This benefits taxpayers in states with no income tax and sometimes those who purchase “big ticket” items, such as automobiles.
  • For taxpayers with children: The lower threshold for the refundable Child Tax Credit has been made permanent at $3,000.
  • Higher tuition tax credit: The enhanced American Opportunity Tax Credit of $2,500 is in place for qualified education expenses.
  • Deduction for teachers: The Teachers Classroom Expense Deduction of $250 allows educators to deduct supplies they bought for their classrooms. It will be indexed for inflation beginning in 2016. It also includes a teacher’s “professional development expenses.”
  • IRA charitable allocation: The Qualified Charitable Distribution allows those over the age of 70 and a half to make a charitable donation directly via trustee-to-trustee from an IRA account. Up to $100,000 of the distribution is tax free.

Individual Provisions Extended Through 2016

  • For homeowners facing foreclosure and short sale: The Qualified Principal Residence Indebtedness Exclusion provides relief for distressed homeowners facing foreclosure and short sale.
  • Deduction for mortgage insurance premiums: The Mortgage Insurance Premiums Deduction is a deduction for private mortgage insurance for homebuyers who put little to no money down when buying their home. Income restrictions apply.
  • Deduction for tuition and fees: The Tuition and Fees Deduction is a deduction for taxpayers (yourself, your spouse or dependents) with qualified education expenses. Income restrictions apply.
  • Energy efficient credit: Credit for energy efficient nonbusiness items, such as windows and doors. Limits apply.
  • Businesses: The Section 179 limit remains at $500,000, and the 50 percent bonus depreciation applies to property placed in service through 2017.

Note that this is only a short list of some of the new tax rules for 2015 and beyond. Please take the time needed to learn the complete rules at IRS.gov - or chat with your local tax professional for more information!

Tags: tax breaks



Karen Reed, EA


During her years as an audit representative for TaxAudit, Karen successfully defended the company’s members throughout the entire federal and state audit processes, handled cases assigned to US Tax Court, and developed procedures to make the audit process easier for taxpayers. Karen attributes a great deal of her tax acumen to the six tax seasons she spent as a return reviewer, analyzing thousands of returns. Responding in writing to questions from taxpayers, she became familiar with the common mistakes self-preparers make. Karen was previously the manager of the Tax Education and Research Department and the Director of Communications at TaxAudit. Her tax advice has been featured in U.S. News and World Report, the Los Angeles Times, the Chicago Tribune, and other publications.


Recent Articles

Tax Returns, plant, and $100 bills laying on a desk
What happens if your spouse overstated the deductions claimed on the return or substantially understated the income?  Are you still liable for the tax due?
wedding cake split with man on one side and woman on the other
Alimony payments may indeed be tax deductible if the divorce or separation instrument under which they are made was executed prior to 2019.
Double Taxation written on notepad
Most states that have income taxes offer a credit for taxes paid to another state on the same income, although how that credit is calculated is not identical.
File Cabinet with Documents
IRS notice CP05A is sent by the IRS to inform taxpayers that they need more information about the submitted income tax return before a tax refund can be issued.
This blog does not provide legal, financial, accounting, or tax advice. The content on this blog is “as is” and carries no warranties. TaxAudit does not warrant or guarantee the accuracy, reliability, and completeness of the content of this blog. Content may become out of date as tax laws change. TaxAudit may, but has no obligation to monitor or respond to comments.