Financial Focus: Congress Makes Tax Credits Permanent

Anthony RivieccioFinancial Focus:  Permanent Tax Credits!?
by Anthony Rivieccio, MBA

The House Ways and Means committee came to an agreement for key legislation to renew a series of tax provisions that had been the source political wrangling repeatedly over the past decade.

The so-called Protecting Americans from Tax Hikes (PATH) Act of 2015 will make permanent many of tax provisions that were renewed year after year, and always at the last minute (like now), during the last ten years.
As a tax and financial advisor, all I can say is, “Merry Christmas to me,” because PATH is a gift that enables every American to do proper tax planning.

Many tax laws have changed. And, I will cover them in the upcoming weeks, Meanwhile, let’s me start with a few of my favorite life style tax adjustments: children,  charitable deductions and teachers.

CHILD TAX CREDIT
The agreement permanently extends the Child Tax Credit of $1,000 per qualifying child. The provision includes an additional refundable portion of the credit for low income workers that allows families to receive a cash refund equal to 15 percent of their earnings over $3,000. So, a single mother with two children who earns $14,000 in 2015 could receive 15 percent of $11,000, or $1,650, as a refund.

EARNED INCOME TAX CREDIT
The Earned Income Tax Credit was introduced by President Gerald Ford. The year-end deal permanently extends the program, including for families with three or more children.

TAX CREDITS FOR COLLEGE
The legislation would permanently extend and expand tax credits for college expense. The American Opportunity Tax Credit provides a $2,000 credit for tuition and qualified expenses for four years of post-secondary education. The first $1,000 of the credit is refundable and begins phasing out for individuals making $80,000 and couples earning $160,000.

TAX CREDITS FOR TEACHERS
The legislation would permanently allow elementary and secondary school teachers to deduct up to $250 in qualified expenses on their personal tax returns. The cap would also be indexed to ensure the size of the credit grows with inflation.

CHARITABLE DONATIONS
To support measures that encourage charitable contributions from businesses and individuals, the tax agreement would permanently expand five credits. One such expanded credit allows individuals, corporations and farmers to donate land to conservation. Individuals over 70.5 years old would also be allowed to directly transfer up to $100,000 from an Individual Retirement Account (IRA) to a qualified charity without penalty. The PATH tax package also includes an expanded tax break for businesses donating food inventory, breaks for charitable donations related to owners of S-corporation small businesses, and offers some modifications for tax-exempt organizations.

Good news is always followed by bad news. In this case, the bad news is that you only have one week left to plan Tax Year 2015.

As these changes are permanent changes to the US tax code, it is imperative to start preparing now, for Tax Year 2016. You can start by asking an income tax advisor or certified tax preparer what items would provide you with the most tax savings.

Remember, the true path to wealth begins with a single step: Income Tax Planning.

Merry Christmas, everyone!

Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating their 18th year as a fee only financial planning firm specializing in solving one’s financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.

For financial inquires, assistance or a FREE COPY of a 2015 Income Tax Guide, Anthony can be reached at (347) 575-5045 or advisorsgroup@ymail.com.