U.S. Congress Passes PATH Act, Extends Tax Breaks for Millions of Americans

Congress recently passed the Protecting Americans from Tax Hikes Act of 2015 (widely known as the “PATH Act”) legislation that will extend a number of different tax breaks for U.S. taxpayers. Had lawmakers not taken the action at the end of 2015, the tax breaks would have expired, leaving millions of Americans in a major hole on Tax Day 2016.

Many of the tax breaks “are expansive and impact nearly all individuals and businesses, across all sectors of the economy,” according to a spokesperson for Dixon Hughes Goodman, one of the largest certified public accounting firms in the country. Some of the most important tax breaks that have been extended include:

  • Mortgage Debt Forgiveness: Congress provided taxpayers with a major tax break by extending the Mortgage Forgiveness Debt Relief Act. Anytime a homeowner sells their property for an amount lower than the remaining amount of the home mortgage and the lender “forgives” the remaining debt, it is known as a “short sale.” A short sale typically leaves the home seller with mortgage debt that can be very costly when the time comes to file taxes because the IRS requires the home seller to classify the forgiven debt as “income.” Under the terms of the Mortgage Debt Relief Act, this debt will not be considered income.
  • Tuition and Fees Deduction: Individuals with post-secondary education expenses, including tuition for college and graduate school, will be able to claim a maximum deduction of $4,000. This deduction was only extended for one year, so Congress will have to decide whether to extend it again before the end of 2016.
  • Teachers’ Classroom Expense Deduction: U.S. teachers at primary and secondary education schools will be able to deduct up to $250 in certain qualified expenses, including the costs of books, school supplies, computer equipment and other classroom items. The tax break extension was made permanent under the new law, so any teacher who works a minimum of 900 hours during the school year should be able to claim this deduction when filing taxes for the foreseeable future.
  • Energy Credit: If you have expenses for home improvements such as added insulation, installation of energy-efficient windows or heating systems, or any other improvements that make your residential property more energy efficient, you may be able to claim an energy credit. This tax incentive was extended through the end of 2016.

To learn more about the implications of the recent tax breaks for U.S. taxpayers, check out the CheatSheet.com article, “5 Biggest Tax Breaks Extended for the Middle Class.”

 

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