House Passes Tax Legislation That Proposes Significant Changes for Businesses
On January 31, 2024, the House passed the Tax Relief for American Families and Workers Act of 2024 (the Act), by a vote of 357-70.
Now, the focus turns to the Senate to see if they will take up the bill before a scheduled two-week recess that starts February 12. And, because the Senate is currently working on other spending and immigration legislation, the prospects and timing of the Act passing the Senate are unclear.
The Act contains proposals to increase the child tax credit and address certain changes related to business tax deductions under the Tax Cuts and Jobs Act. Several of the proposed changes would apply retroactively.
Some of the Act’s proposed changes include:
Deduction for Research and Experimental Expenditures
The proposed changes would allow taxpayers to deduct domestic research and development expenditures incurred prior to December 31, 2025. This is a delay to the capitalization requirements that were passed as part of the Tax Cuts and Jobs Act in 2017. Any costs incurred after December 31, 2025, would be capitalized and deducted over a five-year period.
Extension of 100% Bonus Depreciation
The Act would extend 100% bonus depreciation for qualifying property placed in service after December 31, 2022, and before January 1, 2026.
Increase in Section 179 Limitations on Expensing of Depreciable Business Assets
The proposed changes would increase section 179 expensing limits for property placed in service after December 31, 2023.
Extension of Allowance for Depreciation, Amortization or Depletion in Determining the Limitation on Business Interest
The Act has a provision that will change the calculation for businesses subject to the interest expense limitation. The Act changes the calculation to allow more interest to be deducted by excluding depreciation and amortization from the calculation. If this becomes law, it would be retroactive to years beginning after December 31, 2021, through December 31, 2025.
Modification in Overall Limit on Refundable Child Tax Credit
Under current law, the maximum refundable child tax credit is limited to $1,600 per child for 2023. The proposed changes would increase the maximum refundable amount per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, along with adjustments for inflation for tax years 2024 and 2025.
Other Changes
Other proposed changes in the Act include assistance for disaster impacted communities, changes to thresholds for reporting information on Forms 1099-NEC and 1099-MISC, Taiwan tax relief, and changes to the low-income housing tax credit.
If you would like more information about these proposed changes, please contact your Warren Averett advisor directly.
This article was originally published on January 28, 2024, and was most recently updated on February 1, 2024.