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HLB International INSIGHT - Spring 2016

LATEST NEWS

PATH 2015

2015 Tax Legislation had significant impacts for Individuals and Businesses , the most important of all being the PROTECTING AMERICANS FROM TAX HIKES ACT OF 2015 (PATH), which President Obama signed into law in December of 2015. PATH act provides for permanent extensions for both individuals and businesses and allows for the phase out of other tax breaks through several years (some tax breaks have been extended to 2019 and others to 2016). The following extenders, as these tax breaks were made permanent under the PATH act.

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Small Businesses: Starting with 2016 Tax year, IRS Raises Tangible Property Expensing Threshold to $2,500

The Internal Revenue Service (IRS) has raised the safe harbor threshold for deducting certain capital items from $500 to $2,500 for certain small businesses.

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2015 Tax year Charitable Contributions

Contributions are deductible in the tax year they're made, but many people put off donating until the last minute. Fortunately, you have until December 31 to donate for the 2015 tax year. Donations made online, by phone or using social media that are charged to a credit card on or before midnight on December 31 count for 2015 - even if the bill isn't paid until 2016. Mailed checks also count for 2015 as long as they're postmarked no later than December 31.

If you plan to deduct a sizable charitable contribution on your 2015 tax return, consult with your tax adviser before year end to ensure you're following all the rules.

 

Following IRS Guidelines

 

In order to deduct charitable contributions on your personal tax return, you must itemize deductions and follow these rules:

  • Your contributions must be made to "qualified" organizations. To see whether an organization qualifies, visit the IRS's online search tool, Exempt Organizations Select Check. Giving money to an individual or a foreign organization generally isn't deductible, except for donations made to certain qualifying Canadian not-for-profits.
  • For a charitable donation of cash, regardless of the amount, you must have a bank record or a written document from the charity. Bank records include canceled checks, bank or credit union statements, and credit card statements. These statements should show the name of the charity, the date and the amount paid. Credit card statements should also show the transaction posting date.
  • Clothing and household items donated to charity generally must be in good used condition or better. However, this requirement may be waived for deductions of clothing or household items of more than $500 if you include a qualified appraisal with the return. Household items include furniture, electronics, appliances and linens.

If a contribution entitles you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.

Generation Skipping Tax

For 2016, the lifetime GST tax exemption is set at $5.45 million (same as the estate and gift tax exemptions). Spouses have a separate $5.45 million exemption for a total up to $10.90 million in direct gifts to grandchildren and lower generations without any GST tax worries. Generation-skipping gifts in excess of the $5.45 million exemption will result in the GST tax at a flat 40 percent rate. The GST tax is on top of the 40 percent gift tax rate. If you are planning to skip a generation