The Internal Revenue Service has issued inflation adjustments for several tax breaks involving schoolteacher expenses, transit fringe benefits and Section 179 expensing of certain depreciable assets.
In Rev. Proc. 2016-14, the IRS provides inflation adjustments for items due to the enactment of the Protecting Americans from Tax Hikes Act (PATH Act) of 2015, the tax extenders legislation that Congress passed in December. The revenue procedure also modifies part of section 3.1 7 of Rev. Proc. 2015 - 53, concerning the inflation adjustment for excludable transit benefits.
The law provides that the amount of the deduction allowed for expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by eligible educators in the classroom is adjusted for inflation for taxable years beginning after Dec. 31, 2015. However, the amount of qualified expenses remains $250 as inflation was too low.
Section 105 of the law amends the Tax Code to create parity, for periods after Dec. 31, 2014, between the transit benefit exclusion for the aggregate of transportation in a commuter highway vehicle, such as a van, and any transit pass, and the exclusion for qualified parking. For taxable years beginning in 2016, the amount is $255, which is $5 more than in 2015.
Section 124 of the law amends the Tax Code to provide that the dollar limitation for the aggregate cost of Section 179 property that a taxpayer may elect to expense is $500,000, and that dollar amount is reduced by the amount by which the cost of all Section 179 property placed in service during the taxable year exceeds $2 million. For taxable years beginning in 2016, these amounts are adjusted for inflation.
For taxable years beginning in 2016, under Section 179(b)(1) the aggregate cost of any Section 179 property that a taxpayer elects to treat as an expense cannot exceed $500,000. Under Section 179(b)(2)(C), the $500,000 limitation is reduced (but not below zero) by the amount the cost of Section 179 property placed in service during the 2016 taxable year exceeds $2,010,000.
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