Key tax benefits renewed
The Protecting Americans from Tax Hikes Act, signed into law in December 2015, extended or made permanent a number of tax benefits that had expired at the end of 2014. This means that, as before, eligible taxpayers can claim these benefits on their 2015 returns.
Renewed benefits include:
• Deduction for state and local sales taxes claimed by taxpayers who itemize their deductions on Schedule A and choose to deduct sales taxes instead of state and local income taxes.
• Non-business energy property credit claimed on Form 5695 by homeowners who install energy-efficient windows, doors, furnaces, insulation and other qualifying home improvements.
• Educator expense deduction claimed on Form 1040 Line 23 or Form 1040A Line 16 by teachers and other eligible elementary and secondary educators who pay for various classroom expenses.
• Tuition and fees deduction claimed on Form 8917 by eligible parents and college students.
• Qualified charitable distributions, reported on Form 1040 lines 15a and 15b, by IRA owners, ages 70-1/2 or older, who transfer tax-free up to $100,000 to qualified charities during 2015.
The tax instructions have more information about these and other renewed benefits.
New ABLE accounts for some people with disabilities
States can now offer specially designed, tax-favored ABLE accounts to people with disabilities who became disabled before age 26.
Recognizing the special financial burdens faced by families raising children with disabilities, ABLE accounts are designed to enable people with disabilities and their families to save for and pay for disability-related expenses.
Contributions totaling up to the annual gift tax exclusion amount — $14,000, in both 2015 and 2016 — can generally be made to an ABLE account each year. Though contributions are not deductible, distributions are tax-free if used to pay qualified disability expenses. Visit www.irs.gov/Government-Entities/Federal,-State-%26-Local-Governments/Tax-Benefit-for-Disability-IRC-Section-529A for more information.