US taxpayers no longer have to worry each December if Congress will extend certain tax benefit items for the taxes we begin filing just one month later. Last month the Protecting Americans from Tax Hikes Act of 2015 was signed into law. Here is a complete copy of the Act …..Actual Act from Congress.gov.
So how does it affect you and your 2015 tax filing?
- For us Florida residents we have the ability to elect a deduction for state and local sales taxes instead of state and local income taxes, since we have none. This is now a permanent.
- The American Opportunity Credit is also made permanent. (It was previously scheduled to expire at the end of 2017.) The American Opportunity Credit is a credit of up to $2,500 per year for paying qualified higher education expenses for yourself, your spouse, or your dependent. Many people miss this simple credit, it is more valuable than a “deduction” for other “educational expenses” items.
- For those of us in retirement, with a qualified charitable distribution, a taxpayer over age 70.5 has his or her RMD for the year distributed directly to a qualified charitable organization. This distribution satisfies the annual RMD requirement while being excluded from gross income. The benefit is that this is an exclusion from gross income rather than an itemized deduction (which is what you would ordinarily get for a charitable donation). This is important because it means that this income will not be included in your adjusted gross income, which then determines many things such as how much of your Social Security benefits will be taxable and whether you qualify for other credits/deductions). Furthermore, you can take advantage of this tax break even if you use the standard deduction.
- School teachers can now deduct certain expenses from income, on a permanent basis.
- Enhancements were made to the CTC, Child tax Credit and the EIC, Earned Income Credit. These two credits are very valuable in assisting low income taxpayers or even middle income taxpayers with large families to not just lower their taxes, but get money back even if they pay no taxes whatsoever.
The bottom line is that beginning with our current 2015 tax returns we can count on these items and more to be a permanent part of our tax planning strategy.
By the way your 2015 tax filing is not due until April 18th this year.