Details Behind Tax Relief for American Families and Workers Act
Details of Proposed Tax Relief for American Families and Workers Act of 2024

Date

First introduced in the House of Representatives in January, The Tax Relief for American Families and Workers Act of 2024 is a $79 billion tax relief plan. The bill passed the House by a wide margin (357 to 70) and is now headed to the Senate.

It’s an election year, and legislation touting tax breaks always plays well with constituents. Thus, the proposed plan has a solid potential to be passed into law. And despite the “politics” of the process, we could see a deciding vote before the end of March.

All administrative machinations aside, the real question is, what are the details of this proposed legislation, and how will it impact your taxes?

Here’s a brief overview of what the new plan entails:

Increased Child Tax Credit

The plan proposes an increase in the child tax credit, raising it from $1,600 per child to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025.

Latitude is also built into the proposal for future amendments to increase credit in response to rising inflation. Along with the calculation to modify the credit for larger families to make it fair for those with several children.

Credits for Research + Experimental Expenditures

Large and small businesses currently have access to deductions for domestic research and experimental expenditures, which is intended to be spread over a 5-year horizon, from December 31, 2021, to January 1, 2026.

The proposed legislation allows businesses to immediately file for the full deduction rather than spreading it out over five years. Businesses can also retroactively claim credit for 2022 domestic expenditures.

Expanded Business Interest Expense Deduction

The plan would allow businesses to claim more expense deductions on business interest by reinstating the depreciation and amortization add-back, which can be used to decrease taxable income.

This deduction applies from December 31, 2023, to January 1, 2026. But under certain circumstances, businesses could apply this deduction retroactively, dating back to December 31, 2021.

Increases + Extensions on Depreciation

Under the proposed legislation, deductible expenses on eligible properties would increase from $1 million to $1.29 million as of January 1, 2024.

In addition, the plan aims to extend 100% bonus depreciation on qualified property applicable from December 31, 2022, to January 1, 2026.

Disaster Tax Relief

To address natural and man-made disasters, including recent devastating hurricanes, flooding, wildfires, and the Ohio rail disaster, the plan seeks to eliminate the 10% adjusted gross income limitation and the $500 per casualty threshold. It also permits “above the line” deductions for specific personal casualty losses related to disasters.

Credit for Affordable Housing

The legislation includes provisions to address affordable housing. Specifically, the plan restores the 12.5% low-income housing credit and is applicable in the 2023, 2024, and 2025 calendar years. This measure is projected to help finance over 200,000 affordable housing units for lower-income individuals and families.

Ending Employee Retention Tax Credit Application

To help fund the proposed legislation, businesses will no longer be able to apply for COVID-related employee retention tax credits.

The act also introduces measures to increase penalties on fraudulent claims. And it accelerates the termination of the period for making new claims for the ERTC.

If the Bill Passes, What’s The Impact on Your Taxes?

Much of the potential tax relief in the proposed plan is retroactively applicable to prior tax years. But that said, even if the bill passes before the April 15th annual filing deadline, it will take some time for the IRS to develop procedures for implementing the new legislation.

If you believe any of the proposed adjustments apply to your filing, it’s wise to consider applying for an extension on your 2023 income tax filing. The added time will allow you to consult with a CPA and sort out potential credits and deductions.

Have More Questions on the Proposed Tax Relief for American Families and Workers Act?

It goes without saying that new tax legislation is complicated and often challenging to untangle. Even qualified tax professionals sometimes struggle to parse new tax plans.

If you have further questions about the proposed tax bill or think any of the deductions or credits could apply to you — Don’t hesitate to get in touch for a FREE consultation!

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