PATH Act: What to Know for 2017

Each year around this time an article is written with the title “Good News: Tax Extenders are (finally) passed.” Luckily, this is not one of those articles. At the end of December 2015, Congress passed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). As part of PATH, many business tax provisions were made permanent or extended for five years.

Below is a summary of many of the business tax extenders that were made permanent (with slight adjustments for inflation):

• Section 179 Deduction – Expensing limit up to $500,000 with an annual investment phase-out starting at $2.01 million ($510,000 and $2.03 million, respectively in 2017). Keep in mind that 179 expensing is allowed for both new and used assets placed in service during the year.
• Research & Development Credit – As of January 1, 2016, Eligible Small Businesses are able to use the R&D credit to offset their alternative minimum tax liability. An eligible small business is defined as a business with less than $50 million in average gross receipts over the last three years.
• Qualified Leasehold Improvements are permanently eligible for 15-year straight-line cost recovery.
• Charitable deduction for the contributions of food inventory.
• Employer wage credit for employees who are active duty members of the uniformed services.

Several of the business incentives that were extended for five years include the following:

• Bonus Depreciation – 50 percent bonus depreciation through 2017. In 2018 and 2019, the deduction decreases to 40 and 30 percent respectively. Bonus depreciation is only available for new assets placed in service during the year.
• Work Opportunity Tax Credit was extended through 2019 with enhanced credit for long-term unemployed individuals.

As you read many articles over the next couple of months speculating what changes will occur with the new Administration, it is important to keep in mind what the current laws are and maximize all available deductions and credits.

If you have any questions, or would like to discuss your personal tax situation. Please do not hesitate to contact us.