President Obama is expected to sign what one news agency characterizes as "the closest thing to a grand bipartisan tax bargain in years." Find out how the changes may affect you.
Congress has passed a tax-and-spending package that makes permanent many tax breaks that had been set to expire.
The legislation — which includes $1.1 trillion in spending and $622 billion in tax breaks — now goes to President Obama. He is expected to sign the measure.
Reuters calls the tax portion of the legislation “the closest thing to a grand bipartisan tax bargain in years.”
A press release issued this week by the House’s tax-writing Committee on Ways and Means stated that the package of tax breaks “will grow our economy and help American taxpayers keep more of their hard-earned dollars” while providing “certainty to American taxpayers”:
By making a number of temporary tax provisions permanent, this legislation delivers predictability, clarity, and certainty for individuals, families and job creators. Americans will no longer have to worry each December if Congress will take action to extend certain tax relief policies.
According to the House Committee on Ways and Means, temporary tax breaks that now become permanent include:
The American Opportunity tax credit. The Wall Street Journal describes this credit as “often the best education tax break for many.” It offsets up to $2,500 annually for up to four years of post-secondary education.
The child tax credit. The Journal says the new legislation provides “certain enhancements to the $1,000 credit per child designed to help the working poor.”
The research and development tax credit. This credit will be expanded for small businesses. According to the Journal, starting next year firms with $50 million or less in gross receipts “can claim the credit against their liability for the alternative-minimum tax and, in some cases, the employer’s payroll-tax (FICA) expenses.”
The deduction for certain expenses of elementary and secondary school teachers. This above-the-line deduction is capped at $250. As of 2016, the deduction would be indexed for inflation and expanded such that eligible teachers — and others who are eligible — could put not only classroom supply expenses toward the deduction, but also professional development expenses.
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