The Tax Relief for American Families and Workers Act of 2024 was passed by the US House of Representatives on January 31, 2024. As the Bill moves to the US Senate in its current draft for passage, the Bill is to provide much anticipated business tax relief, expansion of the Child Tax Credit’s refundable portion, and increased disaster relief among other items.
Some Current Main Highlights of the Deal Include:
- Increases the maximum refundable Child Tax Credit from
- $1,600 to $1,800 in 2023, to
- $1,900 in 2024, to
- $2,000 in 2025
…and it would revise the refundable portion of the credit to be calculated on a per-child basis. It would adjust the maximum $2,000 child tax credit for inflation in 2024 and 2025.
- Increases the maximum amount of the Internal Revenue Code IRC §179 present expense deduction to $1.29 million and the investment limitation cap to $3.22 million for property placed in service in tax years beginning after December 31, 2023. Provides inflation adjustments for tax years following 2024.
- Retroactively deferred until 2026:
- The 100% bonus depreciation deduction is extended through 2025 and is retroactive to 2023.
- The removal of amortization, depreciation, or depletion deductions in the business interest expense calculation affecting the adjusted taxable income limitation under IRC §163(j). (Note: This provision initially was slated to begin with the 2022 tax year. It may require an amended tax return.)
- The IRC §174 five- or fifteen-year capitalization and amortization mandate for research expense implementation is pushed out until the 2026 tax year (Mandatory capitalization and amortization became effective in 2022. It is another provision that may subject taxpayers to file amended tax returns if enacted.). The bill would offer taxpayers with one of 3 choices.
- Deduct the R&E expenditures immediately;
- Elect to amortize expenditures attributable to nondepreciable, nondepletable property only over a period of 5 years or less; or
- Elect to capitalize the expenditures.
- Note: The requirement under IRC §174 to amortize foreign research and experimental expenditures over 15 years will not be affected.
- Employee Retention Credit (ERC) claims are barred after January 31, 2024, and enacts substantial penalties that may be imposed against ERC promoters equal to the greater of:
- $200,000 ($10,000 in the case of a natural person); or
- 75% of the gross income derived from the ERC promoter from providing aid, assistance, or advice concerning a return or claim for an ERC refund or a document relating to the return or claim.
- It extends the statute of limitations for certain ERC claims from five to six years.
- Increases the reporting threshold for filing Form 1099-NEC and 1099-MISC from $600 to $1,000. These are applicable to payments made after 2023 and take inflation adjustments into consideration starting in 2024.
- Retroactively excludes qualified wildfire relief payments from gross income for payments received by individuals during the 2020 through 2025 tax years. This is designed to make room for disaster-related personal losses for victims of post-2019 disasters.
- Excludes payments to victims of the East Palestine, Ohio train derailment on February 3, 2023 from gross income as qualified disaster relief payments for purposes of IRC §139(b).
So where do we go from here?
The Bill now goes to the US Senate and is expected to be taken up in March for consideration. The hope is that it will move quickly through the Senate and be signed by the President, but there is always the chance the Bill dies and does not progress further.
We will continue to watch the bill as it works its way through the Senate and possible finalization. Please don’t hesitate to contact us if you have questions.
