Section 179 made permanent
Before recessing for Christmas, in addition to passing the Omnibus, Congress put into action the Protecting Americans from Tax Hikes (PATH) Act of 2015. It makes permanent many of the provisions that had been in limbo, passed on a year-by-year basis.
Accountant Bill Hibner said he had been taking calls “every day” from clients wondering if the tax extenders had been approved by Congress.
The Faith, South Dakota man who operators Hibner Bookkeping figures quite a few of his rancher patrons will be making purchases in the next few days, to take advantage of the tax break. “I expect a bunch of my clients to spend quite a bit between now and the end of the year. Most of my farmers and ranchers have had a real good year – not like it was in ’14 but a good year,” he said. Hibner pointed out that the $25,000 level used for deductible purchases up until the recent congressional action is relatively small in today’s operations. “I’ve had guys go to bull sales and spend more than that. You just can’t buy a tractor or make any real improvements for that,” he said.
Among the provisions is making Section 179 permanent at the $500,000 level, according to http://www.section179.org. Businesses exceeding a total of $2 million of purchases in qualifying equipment will have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.
50 percent Bonus Depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.
The tax breaks are in effect for 2015, but qualifying equipment must be purchased and in use by Dec. 31.
Hibner said that, while he expects quite a few ranchers to make investments, not everyone will. “For some it is easier to pay the taxes than to suffer the consequences of those big purchases.” Hibner said he always advises folks to use caution with large purchases. “The advice I give them is, ‘let your conscience be your guide, and don’t try buying your way out of taxes.’ In my 45 years in this business, I’ve seen a lot of times that people bought themselves out of taxes and the item cost them more than the taxes would.”
Hibner encouraged anyone thinking of making a large purchase to contact his or her tax professional and visit about potential benefits and drawbacks.
The summary of the act is 20 pages long, detailing a permanent status for the enhanced child tax credit, earned income credit, enhanced American Opportunity Tax Credit, and numerous other changes that are designed to spur economic growth for both individuals and businesses. It also calls for stricter consequences for IRS employees who misue their authority.
House Ways and Means Chairman Kevin Brady (R-TX) spoke about the act in a statement on the floor of the House before the vote.
“The most important thing for the American people to know is that this bill prevents their taxes from increasing, helps create more jobs in their communities, and makes it easier for them to do their taxes. It also reins in the IRS and protects taxpayers from waste and fraud within the large tax credit programs administered by the IRS.
“First, it provides $629 billion of tax relief that families and businesses can rely on. It’s financially responsible because preventing a tax increase is never a cost. Republicans have always worked to stop Washington from taking more money from the hard working Americans who earned it. This is not Washington’s money – it’s the taxpayers. And we shouldn’t have to raise taxes on some people to prevent taxes on other people from going up.
“Secondly, by making a number of temporary tax provisions permanent, it will deliver predictability, clarity and certainty for individual taxpayers as well as people managing businesses and trying to invest for the future.
“And as we know all too well, how our country manages its tax code makes absolutely no sense. How can families and local businesses count on tax relief each year as long as Congress can’t decide what’s permanent and what’s not?
“That confusion ends with this bill.
“With this bill in place, Americans will no longer have to worry each December if Congress will take action to extend certain tax relief measures that they have come to rely on – including:
“Allowing state sales tax deductions for families;
“Providing small business tax relief; and
“Offering incentives, true incentives, for innovation, including the research and development tax credit.
“Third, it’s a pro-growth bill. This permanent tax relief will make it easier for employers to plan ahead, hire new workers, grow their businesses and invest in the communities.
“Fourth, Americans who are frustrated by Washington waste will be pleased to know that our bill contains strong measures to fight fraud and abuse in these tax credit programs. While these provisions are significant, they are only a down payment on Republican efforts to make those tax credit programs – which are far too prone to error and abuse today – more accountable.
“Fifth, our bill reins in the IRS and protects taxpayers. It delivers the power to:
“Fire IRS employees who take politically motivated actions against taxpayers;
“Require IRS employees to respect the taxpayer bill of rights; and
“Prohibit IRS employees from using personal email accounts for official business.
“After witnessing years of abuse at the IRS, we can all agree that these provisions are important taxpayer victories.
“And finally, this bill serves as a path forward to pro-growth tax reform by ensuring that we will no longer have to spend months each year debating temporary tax extensions. Instead, Congress can focus on delivering a simpler, fairer and flatter tax code that’s built for growth
Hibner emphasized that even “permanent” changes to the tax law can be changed at any time through Congressional action. “This all hinges on what congress does (in the future). They can stop anything that they want with a vote.”