How will the Tax Extenders’ Bill Affect my Deductions?

Well, our federal government has once again passed a bill with tax provisions late in the calendar year.  The Protecting Americans from Tax Hikes Act of 2015 includes the reinstatement of many “tax extenders.”  They’re called tax extenders because these provisions have lapsed and been reinstated on several occasions.  Let’s discuss a couple that apply to individual taxpayers.

What is the Tax Extenders’ Bill?

First, this bill has made permanent the Charitable IRA Rollover, which is technically called a Qualified Charitable Distribution.  This provision had previously expired.  Now the law describes it as permanent – which really only means it’s available until or unless the law changes.  The Charitable IRA Rollover allows someone over age 70 ½ to transfer cash directly from an IRA to charity as a contribution.  The maximum allowable is pretty high at $100,000 per individual per year.  If implemented properly, the transfer is not reported on the tax return as income and therefore is also not reported as a charitable deduction on the tax return.

What are the Benefits of a Charitable IRA Rollover?

This can be very helpful for taxpayers who otherwise aren’t able to deduct charitable contributions because they don’t itemize on Schedule A of the tax return.  It can also be helpful for those who want to keep their Adjusted Gross Income low to avoid phase-outs of other tax deductions, or to reduce the amount of Social Security benefits subject to federal tax.

Another permanent change in this bill allows taxpayers to claim itemized deductions for state and local general sales taxes paid in lieu of deducting state and local income taxes.  This can be helpful for individuals who itemize on Schedule A but who may live in a state (such as Florida or Texas) that doesn’t have an income tax.

Terry Pratherstart-the-conversation

Published: December 22, 2015

Author: Terry Prather, CFP®, ChFC®, MSFS


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The information in this material is only as current as the date indicated, and may be superseded by subsequent market events or for other reasons. While all information prepared in this document is believed to be accurate, any statements of opinion constitute only current opinions of Payne Wealth Partners, Inc., which are subject to change and which Payne Wealth Partners, Inc. does not undertake to update. Accordingly, you should not put undue reliance on these statements. The information does not attempt to examine all the facts and circumstances that may be relevant to an individual’s financial needs. Payne Wealth Partners, Inc. is not soliciting any action based on these statements.

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