The Tax Relief for American Families and Workers Act of 2024 passed the House of Representatives on January 31, 2024. The key provisions of this include:
- Enhancements to the Child Tax Credit – The Child Tax Credit will be indexed to inflation, and the refundable portion of the tax credit will be incrementally increased for the years 2023, 2024, and 2025. The bill would temporarily extend its benefits to lower-income families by incrementally upping the maximum refundable amount per child to $1,800 for 2023 taxes, $1,900 for 2024, and $2,000 for the tax year 2025. Taxpayers will have flexibility in using either current or prior-year income to calculate the credit during 2024 and 2025.
- Note: It is unclear how it would work for individuals who had already filed 2023 tax returns, whether an amended return would be necessary or a mechanism would be built into the bill. Because there is no date set for the Senate to vote, if you’re negotiating a settlement in a divorce, we would not recommend letting this hold up the negotiations as there will surely be some way to go back, assuming the bill is passed.
- Business Breaks – Businesses of all sizes will be able to immediately deduct the cost of their US-based research and development investments vs. spreading it over 5 years. Full and immediate expensing for machinery, equipment, and vehicle investments will be restored, and the amount of investment that small businesses can immediately write off will be increased to $1.29 million. The bill also addresses the treatment of business interest expense, bonus depreciation, and research and experimental costs, including:
- Bonus – extends 100% bonus depreciation for property with a useful life of 20 years or less that has been placed in service after December 31, 2022, and before January 1, 2026. Any property placed in service after December 31, 2025, and before January 1, 2027, would still be eligible for the 20% bonus depreciation.
- Section 179 – Increases the maximum amount of qualified property a taxpayer can expense under Internal Revenue Code Section 179 to $1.29 million, reduced by the amount by which the cost of property exceeds $3.22 million, which is placed in service after December 31, 2023.
- Note: Some businesses that normally file timely may request extensions to see how this legislation plays out. As a result, in some of our matters where we are waiting for a company or individual tax return, we may be waiting longer than usual!
- Disaster Relief – Recognizing the impact of natural and man-made disasters, the legislation provides tax relief for recent hurricanes, flooding, wildfires, and the Ohio rail disaster.
While the House vote was bipartisan, the outcome in the Senate remains uncertain due to the narrow division. However, the strong support in the House and the potential benefits for American families and businesses may influence the Senate’s decision. GBQ will continue to monitor developments.
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