by Michael Wiener, E.A.
This is an update of tax developments during the 2016 calendar year. Some of these may affect 2016 returns and planning for the 2017 tax year and beyond.
Any number of these provisions are currently in effect only through the end of the tax year (2016) as Congress has failed to extend them. This list is not “all inclusive” nor in any order of importance. I have chosen those which I think are the most important.*
The optional standard mileage rate for valuing an employee’s use of an employer provided auto and for independent contractors is decreased to $.54 per mile for 2016.
- *The exception from Cancelation of Debt (COD) income for certain discharges of qualified principle residence indebtedness was extended through 2016.
- For 2016, taxpayers using their car to travel to a new location because of a change in their work location may claim a $.19 per mile moving expense deduction ($.17 for 2017).
- The treatment of mortgage insurance premiums as qualified residence interest was extended through 2016.
- The election to deduct state and local sales taxes instead of state and local income taxes was made permanent.
- 15-year MACRS depreciation for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property was made permanent.
- 50 percent bonus depreciation was extended to property placed in service before 2018.
- Bonus depreciation is now allowed for all “qualified improvement property,” not just “qualified leasehold improvement property.”
- The enhanced Code Sec. 179 expensing limit was made permanent and is $500,000 for 2016 and $510,000 for 2017.
- Code Sec. 179 expensing is now allowed for air conditioning and heating units.
- The credit for energy-efficient new homes was extended through2016.
- The enhanced American Opportunity Tax Credit (AOTC) was made permanent with a heightened verification processes.
- For 2016 and 2017, the maximum AOTC/Hope Scholarship Credit is $2,500.
- Form 8971 is a new form that is used to report the estate tax value of inherited property to beneficiaries.
- For 2016 and 2017, the threshold amount for cash payments to domestic service employees (e.g., nannies)subject to FICA is $2,000.
- For 2016 and 2017, the personal exemption amount is $4050.
- The filing deadline for 2016 individual returns is April 18, 2017.
- Taxpayers may pay their taxes in cash at participating 7-Eleven stores.
- IRS will transmit a certification to the State Dept. for action to deny, revoke or limit the passport of an individual who has a seriously delinquent federal tax debt.
- For new vehicles bought and placed in service in 2016, and that qualify for bonus first-year depreciation, the boosted first-year dollar limit is $11,160 for autos (not trucks or vans), and $11,560 for light trucks or vans (passenger autos built on a truck chassis, including minivans and sport-utility vehicles (SUVs) built on a truck chassis). The regular first-year luxury auto limits (e.g., for vehicles not eligible for bonus depreciation, or for which the taxpayer elects out of the bonus depreciation) are $3,160 for autos and $3,560 for light trucks and vans.
One of the largest developments of the 2016 calendar year, while not strictly a tax development by any means, was the election. Although further speculation is beyond the scope of this article it is undeniable that many analysts are predicting a massive overhaul of the current tax system in 2017.
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