What the PATH Act of 2015 Means for Taxpayers

On December 16, 2015, Finance Committee Chairman Orrin Hatch, House Ways and Means Committee Chairman Kevin Brady, and Senate Finance Committee Ranking Member Ron Wyden announced a major bipartisan tax agreement—the Protecting Americans from Tax Hikes (PATH) Act of 2015. This legislation represents a significant shift in how Congress handles the so-called “tax extenders,” a set of temporary tax provisions that have historically required last-minute annual renewals.

Many of these extenders have now been made permanent, while others were extended through either 2016 or 2019. In addition to the extenders, the PATH Act includes provisions affecting Real Estate Investment Trusts (REITs), IRS procedures, the Tax Court, and other miscellaneous tax regulations.

Key Highlights for Individuals and Families

The PATH Act introduced several meaningful enhancements for taxpayers—especially those with children or higher education expenses. Notable permanent expansions include:

• Enhanced Child Tax Credit: $1,000 per qualifying child, phasing out at $110,000 AGI for married couples ($75,000 for individuals).

• Enhanced American Opportunity Tax Credit (AOTC): Now offers up to $2,500 per year for four years of post-secondary education, with phase-outs beginning at $160,000 for couples and $80,000 for individuals.

• Enhanced Earned Income Tax Credit (EITC): Permanently expanded to offer greater support for low- and moderate-income working individuals.

• 529 Plan Improvements:

  • Now includes computer equipment, software, and internet access as qualified expenses.

  • Eliminates the aggregation rule for non-qualified distributions, allowing gains and contributions to be calculated per individual account.

  • Removes the in-state residency requirement for ABLE accounts.

These changes simplify planning and offer increased flexibility for families saving for college or raising children.

What Business Owners Need to Know

Business owners also benefit significantly from the PATH Act, particularly due to changes in Section 179 expensing and bonus depreciation:

• Section 179 Expensing:

  • Permanently reinstates the $500,000 maximum deduction and $2 million phase-out threshold, retroactive to 2015.

  • Allows certain real property to qualify as Section 179 property.

• Bonus Depreciation:

  • Extended through 2019 but gradually reduced: 50% (2015–2017), 40% (2018), and 30% (2019).

  • Ends entirely after 2019 unless future legislation extends it.

These provisions offer greater certainty and planning opportunities for businesses investing in equipment and infrastructure.

Looking Ahead: Permanent, Temporary, and Expired Provisions

The PATH Act brought clarity to a traditionally uncertain area of tax law by permanently enacting many widely used provisions:

Permanent Tax Extenders Include:

• Tax-free IRA distributions to charity

• State and local sales tax deduction

• Research and development tax credit

• S corporation charitable contribution basis adjustments

• 15-year straight-line depreciation for qualified real estate

• 100% exclusion of gain on qualified small business stock

• Parity for mass transit and parking benefits

• Subpart F exception for active financing income

• 9% minimum low-income housing credit for non-subsidized buildings

Extended Through 2016:

• Exclusion of discharged mortgage debt on short sales

• Deduction of mortgage insurance premiums

• Above-the-line education deduction for tuition and fees

These changes provide taxpayers with a more stable planning environment moving forward. However, not all provisions were made permanent—some were only extended temporarily and will need future review.

Final Thoughts

The PATH Act of 2015 represents a significant win for taxpayers by bringing permanence to many valuable deductions and credits, reducing the year-end uncertainty that has historically surrounded tax planning. For families, students, and business owners alike, the provisions in this bill offer increased flexibility and long-term tax savings potential.

If you have questions about how these changes might affect your situation, please contact us. While we’re happy to help guide you through the implications, Gainplan and its associates are not tax advisors, and we recommend speaking directly with a tax professional regarding your personal tax matters.

Source: congress.gov

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