More On Tax Planningfrom The Advisor's Professional Library
- Selected Provisions of the American Taxpayer Relief Act of 2012 The experts of Tax Facts have produced this comprehensive analysis of selected provisions of the American Taxpayer Relief Act of 2012 (the Act) to provide the most up-to-date information to our subscribers. This supplement analyzes important changes to the tax code with emphasis on how these developments impact Tax Facts’ major areas of focus: Employee Benefits, Insurance, and Investments.
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
The House Ways and Means Committee passed Thursday a package of tax extenders, including a permanent extension of bonus depreciation, as well as extenders that deal with retirement planning and charitable giving.
The committee voted to make permanent the rule allowing certain tax-free distributions from individual retirement accounts for charitable purposes.
Also, the committee voted to permanently extend and expand the charitable deduction for contributions of food inventory and to modify the tax rate for excise tax on investment income of private foundations.
As political strategist Greg Valliere notes in his Friday commentary, outgoing Ways and Means Chairman David Camp, R-Mich., “earnestly believes in permanent, not temporary, tax solutions” — thus, the permanent tax break on Thursday of bonus depreciation — which would “cost a mere $287 billion over the next decade.”
In the absence of comprehensive tax reform, the Tax Foundation argues that “a permanent extension” of bonus depreciation “is the best option to spur investment, lift wages, grow the economy, create jobs and increase federal revenue.”
Bonus depreciation, also known as bonus expensing, allows all businesses to immediately deduct 50% of investment in equipment and software with the remainder to be written off over a few years according to the normal depreciation system, the Tax Foundation’s William McBride explains in a recent blog.
McBride says the foundation believes that bonus depreciation “would boost investment and other economic activity to such a degree that it would pay for itself in the end, and eventually increase revenue by $23 billion per year.”
The permanent extension of bonus depreciation comes on the heels of the recent permanent extension of the research and development tax credit, which Valliere notes would cost “just under $300 billion over the next decade (and wasn’t paid for).”
The Senate was scheduled to pass a two-year extension of the bonus depreciation and R&D and other corporate tax breaks, Valliere notes, but “has stalled because of bitter fight over [Senate Majority Leader] Harry Reid’s refusal to allow GOP amendments to virtually any bill.”
A permanent extension of all tax breaks, Valliere adds, “would cost over $1 trillion in the next decade, which is impossible unless it’s in the context of a fundamental tax overhaul.”
Check out Senate Finance Approves Tax Extenders on ThinkAdvisor.