.png){kind=small}
Congress has released a bi-partisan package of tax law changes that would temporarily expand or extend certain tax provisions. The aim of this package is to extend benefits to businesses and low-income families. The deal faces resistance from both the left and right and congress is currently focused on funding the government to avoid shut down. Supporters hope to pass the package before January 29th to avoid disruptions to tax filing season and there is a chance Biden takes executive action and signs this into law. More to come.
Highlights – For detail, please see the Ways and Means Committee Blog Post.
Tax Relief for Working Families: The maximum refundable child tax credit would increase from $1,600 per qualifying child to $1,800 for 2024 with an increase of $100 per year through 2025. The calculation of the maximum refundable amount would also change to allow for a generally larger refundable credit.
Research & Development Costs: Currently, research and development costs incurred in the United States is required to be deducted over the span of 5 years. If signed into law, we would revert to the deduction of R&D costs in the year they are incurred through December 31, 2025.
Business Interest Limitation: This tax proposal would restore a previous interest deduction calculation for business. It extends the application of EBITDA to taxable year beginning after December 31, 2023 and before January 1, 2026. This aims to help businesses forced to borrow at higher rates to continue to grow while meeting payroll obligations.
Extension of Bonus Depreciation: The bonus depreciation rate on eligible assets was set to drop from 100% depreciation to 80% for the 2023 tax year. The proposal is to revert to 100% depreciation in year one for eligible assets.
Increase in Limitations on Expensing Depreciable Business Assets: The provision would increase the amount a taxpayer can expense (versus depreciate) to $1.29 million for 2023, up from $1.16 million. This deduction is subject to other limitations.
1099-NEC & 1099-MISC Reporting: To ease the reporting burden, the threshold for filing a 1099 would increase from $600 to $1,000.
Employee Retention Tax Credit: Aimed at reducing the administrative burden and reducing fraud, this bill would increase related penalties for ERTC claims and move up the date for filing a claim from April 15, 2025 to January 31, 2024. This would end the ERTC program as of the end of this month.
There are additional provisions not detailed above such as Taiwan Double Tax Relief, Assistance for Disaster-Impacted Communities, and Affordable Housing.