Press Room: Tax Release

January 07, 2016

Top Five Opportunities for Individuals From Extender Bill

The end of 2015 brought with it the Protecting Americans from Tax Hikes of 2015 Act, (the PATH Act) an extender package that makes permanent certain tax-benefit provisions that expired at the end of 2014, renews a handful of provisions for five years, and extends dozens of other provisions through 2016. Andersen Tax released an overview of the PATH Act in December. As a follow up, here are the top five opportunities for individuals:

1. Tax advantaged charitable distributions from IRAs are now permanent. Charitably inclined IRA owners over 70 ½ can direct up to $100,000 be sent to their favorite charities directly out of their IRA and exclude it from taxable income. This allows them to sidestep the usual charitable deduction limitations that might apply. Since IRAs tend to be the most expensive asset to leave to family members in an estate, this provision can make those deferred dollars work much harder for the right family.

2. A contribution deduction for conservation easements on real property has been an on again, off again provision of the law. It is now made permanent, allowing donors a higher deduction limitation for their gifts.

3. The research tax credit has been in the law – and out of the law – since 1981. The provisions are now permanent and the simplified credit available has increased to 20%. Individuals directly involved in research can benefit from this credit.

4. Qualified Small Business Stock provisions are now permanent. This tax provision allows founders and other early investors in qualified corporations the ability to exclude from taxation as much as $10 million of gain – or ten times their tax basis, whichever is greater. For many taxpayers, this has proven to be a significant and poorly understood benefit.

5. For individuals who are selling their S corporations, the former 10-year Built-In Gain period has now been permanently reduced to five years. This could mean tremendous tax savings to those who are considering selling their S corporations and allowing the buyers to elect to treat the transaction as an asset sale (in order to generate a higher offer price for the sellers).