Learn more about the proposed Tax Relief for American Families and Workers Act of 2024 and the highlights included within the Act.
On January 16, 2024, the websites of the United States Senate Committee on Finance and the United States House Committee on Ways and Means, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason Smith (R-Mo.) jointly announced “a commonsense, bipartisan, bicameral tax framework that promotes the financial security of working families, boosts growth and American competitiveness, and strengthens communities and Main Street businesses.”
The plan, introduced as The Tax Relief for American Families and Workers Act of 2024 (the Act), generally proposes to revive expired breaks for businesses and increase the child tax credit for low-income families (but also includes disaster relief provisions and other tax relief measures). Congress hopes to push the roughly $80 billion in tax breaks through Congress in the next few weeks (before the January 29, 2024 start of tax season) with parts of the bill being retroactive. The agreed-to framework proposes to pay for the tax breaks by cutting off new claims for the COVID-19 era employee retention credit program filed after January 31, 2024.
THE ACT HIGHLIGHTS
Supports Working Families with an Enhanced Child Tax Credit
- Expands access to the child tax credit: phased increase to the refundable portion of the child tax credit for 2023, 2024, and 2025.
- Eliminates the penalty for larger families, allowing the child tax credit phase-in to be available to families with multiple children.
- Provides a one-year income lookback, creating flexibility for taxpayers to use either current or prior-year earned income to calculate the child tax credit in 2024 or 2025.
- Indexes the tax credit for inflation starting in 2024.
Expands Innovation and Competitiveness with Pro-Growth Economic Policies
- Retroactively allows an immediate deduction for research & development (R&D) expenditures, allowing businesses of all sizes to immediately deduct the cost of their U.S.-based R&D investments. The bill delays, rather than eliminates, the requirement to capitalize and amortize U.S. based R&D until 2026. The provision does not change current requirements for non-U.S. based research activities.
- Retroactively expands the ability to deduct business Interest expense by allowing depreciation and amortization deductions in the computation of adjusted taxable income through 2025. The provision for 2022 and 2023 is elective.
- Provides for full and immediate expensing for investments in machines, equipment, and vehicles by extending the 100% bonus depreciation provision generally through 2025 and by increasing the Section 179 expensing allowance beginning in 2024.
Increases Global Competitiveness
- Provides relief for the current double taxation on U.S. – Taiwan cross-border investment.
Provides Disaster Relief
- Extends previous rules for qualified disaster related personal casualty losses, including eliminating the requirement that casualty losses must exceed 10% of adjusted gross income (AGI) to qualify for the deduction, requiring losses to exceed $500 per casualty in order to be deductible, and allowing taxpayers to claim the casualty loss deduction “above the line,” i.e., without itemizing their deductions.
- Provides exclusions from gross income for payments for losses or damages resulting from certain wildfires and the East Palestine, Ohio train derailment.
Targets Affordable Housing
- Restores the Low-Income Housing Tax Credit ceiling to 12.5% from 9% for calendar years 2023 through 2025.
- Reduces tax-exempt bond financing requirements.
Ends the Employee Retention Tax Credit Program
- Accelerates the deadline for filing claims under the COVID-era employee retention tax credit program to January 31, 2024.
One important measure left out of the proposal advocated by some politicians is an increase to the State and Local tax deduction limitation. The deduction is currently limited to $10,000.
Finally, there is no guarantee that the proposed legislation embodied by the framework in its current form will make it past both the House and Senate, let alone be signed by the President.
We will continue to monitor the situation closely, providing status updates and insights regarding appropriate actions once any provisions become law.
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