On January 31, 2024, the House of Representatives passed the “Tax Relief for American Families and Workers Act of 2024” (“The Act.”)
The Act includes several provisions that, if signed into law, would affect tax returns for the tax year 2023. However, the Act is currently stalled in the Senate, and it is unclear when or if it will become law.
The Act includes the following provisions affecting business and personal tax returns.
Child Tax Credit
The Act increases the refundable portion of the child tax credit for 2023, 2024, and 2025. It also indexes the credit to inflation. Potentially affected taxpayers should file tax returns under the current rules. IRS Commissioner Danny Werfel has stated that if the law passes, the IRS will issue refunds according to the new law without taxpayers needing to file amended returns.
Research and Development Expenses
The Act would allow businesses to deduct domestic research and development expenses immediately. Under current law, these costs must be capitalized and amortized over five years.
Business Interest Expense
The Act would restore the add-back of depreciation and amortization expense to calculate the amount of interest expense a business can deduct. This would potentially increase the amount of interest expense deductible for tax years 2022, 2023, 2024, and 2025 as compared to the current law.
Section 179 Expense
The Act would increase the maximum Section 179 deduction from $1,160,000 to $1,290,000 for 2023 and index the limit for inflation beginning in 2024.
Bonus Depreciation
The Act would retroactively increase the first-year expensing limit, allowing businesses to write off 100% of the cost of qualified assets placed in service between 2023 and 2025. Currently, only 80% of the cost of qualified assets would qualify for bonus depreciation in 2023.
Takeaways
While the Act has some promising provisions that are a welcome relief to taxpayers, the uncertainty around its passage creates a roadblock to completing the current year’s tax returns due on April 15, 2024. For business returns that are affected by any of the issues contained within the Act, it may be wise to file for an extension until the issues surrounding the passage of the legislation are resolved.
If you have any questions or need more clarity, please contact your WG advisor immediately.
