On January 19, 2024, the bill Tax Relief for American Families and Workers Act of 2024 was passed by the House Ways and Means Committee. The bill includes provisions for tax relief, such as an increase of the child tax credit, a delay in deducting research and experimentation expenditures, and an extension of 100 percent bonus depreciation through 2025. It also increases the Code Sec. 179 deduction limitation.
Some significant proposed changes would be retroactively applicable to prior tax years, with the aiming of reaching President Biden before the 2023 tax filing season. However, uncertainties arose due to the January schedules of the House and Senate, and as such the bill has not yet been signed into law. We are continuing to monitor this daily.
For our individual taxpayers, this bill focuses on the child tax credit’s expansion, including per-child basis calculations and statutory increases for the tax years 2023-2025. This law would calculate the refundable amount on a per-child basis. This means that after calculating 15% of the earned income exceeding $2,500, the resulting amount is then multiplied by the total number of children, determining the overall refundable amount. Furthermore, the statutory increase will apply to the maximum refundable credit for three tax years, setting amounts at $1,800 for 2023, $1,900 for 2024, and $2,000 for 2025. Additionally, the maximum overall child tax credit will be adjusted for inflation, departing from the fixed $2,000 amount for 2024 and 2025.
For our business clients, the bill aims to postpone the implementation of amortizing research and experimental costs related to domestic activities until tax years commencing after December 31, 2025. Currently, domestic research and experimental expenditures incurred in tax years starting after December 31, 2021, must be amortized over five years, whereas in years before 2021, these expenses were immediately deductible. Costs related to research and experimentation that are conducted outside the U.S. are amortized over a 15-year period. The bill includes transitional rules for research credit interactions and introduces accounting changes. The bill also proposes the extension of 100-percent bonus depreciation through 2025 and increases the Code Sec. 179 deduction limitation to $1.29 million.
Haley Melanson is a Audit & Tax Supervisor at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.