Congress’s passage of legislation last December making many expired tax breaks permanent adds an extra measure of certainty for tax preparers helping their clients with tax planning this year.
“The Section 179 deduction being made permanent with a set amount and then being adjusted for inflation will allow us to help our clients plan their purchases a whole lot better,” said Texas Society of CPAs chair Allyson Baumeister, who is also a principal in charge of the Forth Worth office at CliftonLarsonAllen. “The R&D tax credit being made permanent is also a huge factor for businesses that have those kinds of deductions to be able to plan as well.”
For individual taxpayers, there is more certainty with charitable contributions from individual retirement accounts, and tax credits for education and energy conservation. IRA owners who have reached age 70½ can make tax-free charitable contributions of up to $100,000 directly to charities from their IRAs and have them count as required minimum distributions.
“On the individual side, charitable contributions made out of IRAs for folks 70½ being made permanent is also fantastic,” said Baumeister. “Those taxpayers that fall under that category like to have certainty. It’s been challenging for them not to know for sure whether they can use their required minimum distribution for the charitable contribution, so that’s a positive. Then the education credit being expanded and made permanent is also fabulous. And for those that do conservation, the credit for residential energy credit conservation is also great.”
Some tax provisions were merely extended and not made permanent, but they too have some extra certainty, at least for a few years. “Even though the bonus depreciation wasn’t made permanent, the fact that it was extended until 2019 and we know what percentages those are is also very helpful,” Baumeister pointed out.
She anticipates the expanded tax breaks will provide tax professionals and their clients with a good foundation for future tax planning.
“Especially for our business clients, but for all the clients, the fact that for the last several years they have not been extended until the very end of the year or until the following year has made planning almost impossible,” said Baumeister. “Now that we actually have knowledge of what’s permanent and what’s been extended for either two, three or five years will help tremendously with tax planning for our clients. It’s the talk of the town in the tax world for sure.”
Don’t expect to see much else in the way of tax reform this year, though.
“Since we are in a presidential election year this is probably all that we will see for a year,” said Baumeister. “But it’s good news.”