New Upcoming Tax Legislation & Impacts to Taxpayers

Key Takeaways from the Tax Relief for American Families and Workers Act of 2024

The Tax Relief for American Families and Workers Act of 2024 bill, currently passed in the House and with the Senate to approve, includes many significant changes that impact taxpayers this season. Here are the key takeaways that you need to know.

Child Tax Credit Changes:

  • If the bill is passed, the child tax credit is set to increase until 2025.
  • The current child tax credit is $2,000 per child under 17 years old, with a phase-out starting at $400,000 income for married filing jointly and $200,000 for other filers.
  • The refundable portion of the credit (additional child tax credit) could increase to $1,800 per child for 2023, $1,900 for 2024, and $2,000 for 2025, with inflation adjustments from 2024.
  • Tax filers could use the higher of either the current or previous year’s earned income to calculate the 2024 and 2025 credit.

Bonus Depreciation Extension:

  • The bill proposes to extend the current 100% bonus depreciation for qualified property placed in service from 2023 to 2025.
  • After 2025, the bonus depreciation would decrease to 20% and be phased out by 2027.
  • For more information on what is included in the definition of qualified property for the Bonus Depreciation, please reference the IRS’ FAQ guidance here.

Research and Experimental Expenditures:

  • As a part of the new bill, businesses would be able to deduct domestic R&E expenses incurred from 2022 through 2025.
  • R&E expenses are generally defined as all costs related to the development or improvement of a product. The proposed R&E deduction change may be of particular interest to manufacturers.

Business Interest Deduction Adjustment:

  • The bill proposes to exclude depreciation, amortization, and depletion from adjusted taxable income for business interest deduction calculations for tax years 2022 through 2025.
  • Please note that this business interest deduction limit is only applicable to businesses that have more than $30 million in gross receipts.

Additional Provisions in the Bill:

  • Section 179 deduction is set to increase to $1,290,000, this deduction is available for most assets used by taxpayers in an active farming business.
  • The bill includes higher penalties for promoters of erroneous Employee Retention Credit (ERC) claims. These penalties are included in the bill in an attempt to stop scammers. The proposal also would extend the period for taxpayers to correct invalid ERC claims. For more information on ERCs, check out our podcast episode with our resident expert, principal Magen Koepp, CPA on the topic.

Stay tuned for more updates on the Tax Relief for American Families and Workers Act of 2024 bill. At the moment, taxpayers significantly affected by these changes should consider waiting to file their 2023 taxes until it’s clear that the bill will indeed become law. We advise working directly with your accountant for questions on any of the changes included in this new legislation.

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DISCLAIMER: This blog is provided for informational purposes only and is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant. Presentation of the information in this article does not create nor constitute an accountant-client relationship. While we use reasonable efforts to furnish accurate and up-to-date information, the evolving landscape surrounding these topics is supported by regulations or guidance that are subject to change.

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