February 7, 2024
Tax Relief for American Families and Workers Act of 2024
In late January, the House of Representatives passed important bi-partisan tax legislation that provides several saving opportunities for families and businesses. The Tax Relief for American Families and Workers Act of 2024 (Act) calls for the extension of several credits and incentives that expired at the end of last year. It includes an increase to the reporting threshold for Form 1099s, changes to federal Section 174 research and development (R&D) credit expense rules, an extension of bonus depreciation, and updates to the Child Care Credit. There is also a provision that calls for a ban on accepting new Employee Retention Tax Credit claims effective January 31, 2024. This would retroactively end the popular COVID-19 era incentive. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.
Key Tax Provisions
- Employee Retention Tax Credit – In addition to the program’s early termination date there are other changes to enforcement and reporting requirements. The Act calls for extending the statute of limitations for prosecution from five to six years. It also increases the penalties on ERTC promoters for aiding and abetting the understatement of a tax liability to the greater of $200,000 ($10,000 in the case of a natural person), or 75% of the gross income of the promoter. Finally, promoters must file return disclosures and provide a list of clients to the IRS on request. There are associated penalties which may be assessed for non-compliance.
- Section 174 R&D Expensing – Currently a business with eligible R&D expenses is unable to make an immediate deduction. Due to changes made in the Tax Cuts and Jobs Act of 2017, these expenses must now be capitalized and deducted over 5 years (domestic activities) or 15 years (international activities). The change has forced some to delay scheduled activities until the savings can be realized. The Act calls for an important modification allowing domestic R&D expenses incurred before January 1, 2026, to be immediately deducted.
- Bonus Depreciation – Another expiring provision in the Tax Cuts and Jobs Act is 100% bonus depreciation. Under current regulations, the amount of bonus depreciation that can be claimed is reduced by 20% every year ending in 2026. The Act would extend bonus depreciation for eligible property placed in services after December 31, 2022, and before January 1, 2026. It is important to note, there is an exception for longer production property and certain aircraft to January 1, 2027.
- Section 179D Expensing – The Act also called for an expansion to Section 179D expensing by increasing the limits from $1.16M to $1.29M. There is also an increase in the phase-out threshold from $2.89M to $3.22M starting in 2024. The dollar amounts will be indexed for inflation in subsequent years.
- Child Care Tax Credit Expansion – There is also a provision that calls for an increase in the amounts available under this federal tax incentive. The Act would increase the maximum refundable amount per child from $1,600 to $1,800 in the 2023 tax year. The amount again increases to $1,900 per child in 2024. There is also a modification to how the credit is calculated.
Contact Us
The proposed changes are welcome news for families and businesses. If passed in the Senate, the Tax Relief for American Families and Workers Act of 2024 will create significant tax savings. We will keep you informed of any updates. If you have questions about the information outlined above or need assistance with tax planning or accounting need, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.
