Asked and Answered: Common Questions Raised at Surgent’s PATH Act Webinars
Surgent’s webinars are very interactive – allowing participants to ask questions about how a tax or law affects their business, their clients, and themselves.
Although it’s only been a month since Congress passed the PATH (Protecting Americans from Tax Hikes) Act, Surgent has presented numerous webinars and conferences explaining the Act’s ramifications.
We thought it might be a good idea to share some of the FAQs (frequently asked questions) we’ve received – and answered – thus far:
Question: How did the PATH Act affect Section 179?
Answer: Congress has increased and decreased Section 179 limits over the years, with Congress often making businesses wait before raising it with the various stimulus acts over the years. That ended in late 2015, when the PATH Act raised Section 179 to $500,000, and made it permanent. It also reinstated the 50% Bonus Depreciation on new equipment purchases, and also included escalators for inflation in future years.
Question: Can I lease equipment and still qualify for Section 179?
Answer: Yes. In fact, it’s a preferred strategy as your deduction may actually exceed the total loan or yearly lease payments – significantly helping with profits and cash flow.
Question: How does the PATH Act affect the Affordable Care Act (ACA)?
Answer: The PATH Act affects the ACA by:
- Imposing a two-year moratorium (for sales in 2016 and 2017) on the ACA’s excise tax on qualified medical devices
- Delaying the excise tax on high-cost employer-sponsored health coverage (also known as “Cadillac” plans) until the year 2020 (instead of 2018 as originally scheduled by the ACA)
- Making the excise tax on high-cost plans deductible as a business expense to the employer / payor
Question: How does the PATH Act affect REITS & FIRPTA?
Answer: The PATH Act modifies a number of the REIT (real estate investment trusts) and FIRPTA (Foreign Investors in Real Property Tax Act) rules, including:
- Restricting the ability of companies that are not REITs to spin off REIT subsidiaries on a tax-free basis
- Expanding opportunities for certain foreign investors to invest in U.S. real estate without paying FIRPTA taxes
Question: How does the PATH Act affect employee benefits?
Answer: The PATH Act affects employee benefits by:
- Clarifying church plans and certain governmental plans
- Permitting rollovers from qualified plans into SIMPLE IRAs
- Clarifying that the 10% early distribution tax for public safety employees separating from service after age 50 also applies to federal law enforcement officers receiving retirement plan distributions
Question: How does the PATH Act affect 529 (Qualified Tuition) Plans?
Answer: The PATH Act affects 529 plans by:
- Clarifying, and making permanent, that qualified higher education expenses include the purchase of computers, software, and internet access
- Revising the rules for aggregation and refunds
- Making some taxpayer-friendly changes to ABLE accounts, which are similar to 529 plan accounts for disabled individuals and disability expenses – the most important being that beneficiaries no longer need to reside in the state in which the account is created
Have Questions of Your Own? Surgent can help. To learn more about the new legislation and how it impacts tax practitioners, attend our webinar: “Critical Tax Extender Update: Protecting Americans from Tax Hikes Act of 2015 (PROA).”