Congress Passes Extender and Other Tax Legislation

Date01 May 2016
Published date01 May 2016
© 2016 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22166
Congress Passes Extender and Other
Tax Legislation
Caroline D. Strobel
Congress passed the tax
extender bill in the last days
of 2015. The bill extends a
number of provisions that
expired at the end of 2014 and
also enacted some additional
tax legislation. The follow-
ing includes some of the more
important provisions.
The provision that allows
a taxpayer over the age of 70½
to make a qualified charitable
distribution of up to $100,000
directly from an individual
retirement account (IRA) to
a charity has been made per-
manent. The contribution to
the IRA is not allowed as a
charitable deduction, but the
distribution from the IRA is
not taxed as income either. The
distribution also counts as the
taxpayer’s required minimum
distribution for the year.
Taxpayers are allowed to
claim an itemized deduction
for either state income taxes
or state sales taxes. The state
sales tax deduction can be
determined by either adding
up the actual state sales taxes
paid and validated by receipts,
or they can use the IRS sales
tax deduction calculator, which
provides an estimate that can
be claimed as sales taxes paid
based on the taxpayer’s income
and zip code. This provision
provides a deduction for tax-
payers living in a state like
Washington or Florida, which
do not have state income taxes.
The American Opportunity
Tax Credit was set to revert back
to the less expansive Hope Schol-
arship Credit at the end of 2017.
This credit is now permanent.
The credit can be taken for up
to $2,500 per year for up to four
years of postsecondary educa-
tion. The adjusted gross income
(AGI) phase-out is $160,000 for
a married couple and $80,000 for
single individuals.
The child tax credit is a
$1,000 credit available for each
“qualifying child” in the house-
hold who is under the age of 17,
lives with the taxpayer, is claimed
as a dependent, and does not
provide for more than half of
their own support. It phases out
when AGI exceeds $110,000 for
married couples and $75,000 for
an individual. For lower income
individuals who do not even have
a tax liability of $1,000, the child
tax credit becomes a refundable
credit called the “additional child
tax credit,” which refunds 15% of
income over $3,000. Under the
“additional child tax credit,” the
limit on the credit remains $1,000.
Elementary and second-
ary schoolteachers are eligible
for a deduction of up to $250
in arriving at adjusted gross
income. The legislation indexes
the cap for inflation beginning
in 2016. Also in 2016, eligible
schoolteacher expenses have
been expanded to include pro-
fessional development expenses
in addition to in-classroom
schoolteacher supplies.
The Section 179 expensing
provision limits including the
$500,000 maximum deduc-
tion amount and the $2 mil-
lion threshold for phasing out
the deduction are retroactively
reinstated for 2015 and made
permanent. Special rules allow-
ing expensing deductions for
computer software and certain
qualified real property are also
made permanent. In addition,
the new rules index the $500,000
maximum deduction and the $2
million phase-out threshold for
inflation beginning in 2016.

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