This deduction is now indexed for inflation, which is another change. But it’s not likely to budge soon from $250. It only changes in $50 increments. So it will take 20% cumulative inflation from 2015 (a $50 change divided by a $250 base) to actually increase the deduction for educators, Luscombe explains.
It’s estimated the recent tax act’s price tag will be more than $620 billion over 10 years. “It was surprising to me that a lot of provisions were made permanent without paying for them,” Luscombe says. “That had always seemed in the past to be a roadblock to making them permanent, but not so this time.”
Here’s how recent legislation affected various tax breaks.
FOR BUSINESSES
Made Permanent
• The research tax credit
• Section 179 expensing up to $500,000* for purchases of equipment and off-the-shelf computer software, with phaseout when total purchases exceed $2 million*
• 15-year depreciation for qualified restaurant property, leasehold improvements and retail improvements
Extended Through 2019
• Bonus depreciation on purchases of new property (50% of cost through 2017, 40% in 2018, 30% in 2019), or option to accelerate AMT credits instead
FOR INDIVIDUALS
Made Permanent
• Tax-free IRA distributions to charity after age 70 and a half, up to $100,000 annually
• Itemized deduction for state and local sales tax instead of income tax
• The American Opportunity Tax Credit for qualified education expenses
• The $250* above-the-line deduction for elementary and high school teachers’ classroom expenses (and professional
development expenses beginning with 2016 tax returns)
• Tax-free distributions from Section 529 plans for the purchase of a computer and related technology expenses
Extended Through 2016
• The above-the-line deduction for college (post-secondary) tuition and fees
• The residential energy property credit of up to $500
• Exclusion from income of up to $2 million of forgiven debt on a residence
*Indexed beginning in 2016. Sources: Internal Revenue Service; Wolters Kluwer Tax & Accounting.