Tax Relief Legislation in Progress

Legislation that could benefit parents and business-owners is currently moving through Congress. The House has passed the Tax Relief for American Families and Workers Act of 2024. It now faces an uncertain future in the Senate. The legislation would make changes to the child tax credit and certain business tax provisions. Some significant provisions in the legislation that may provide tax relief are summarized below.

Child tax credit provisions

If enacted, the legislation may increase the availability and amount of the child tax credit.

• The formula for calculation of the refundable portion of the child tax credit would be modified to take into account the number of children a parent has (effective for 2023, 2024, and 2025).

• The overall limit on the refundable portion of the child tax credit would increase from $1,600 in 2023 and $1,700 in 2024 to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025.

• The $2,000 maximum child tax credit would be adjusted for inflation in 2024 and 2025.

• In 2024 and 2025, earned income from the prior taxable year would be able to be used in calculating the maximum child tax credit if earned income for the current year is less than earned income for the prior year.

Business tax provisions

The legislation includes several business tax provisions. These provisions generally allow businesses to accelerate expense deductions.

Section 179 expensing allows businesses to expense the cost of qualified property instead of depreciating it. In 2024, the maximum expensing limit is $1,220,000. This amount is reduced if total qualifying property exceeds $3,050,000.
The legislation would raise these limits to $1,290,000 and $3,220,000 in 2024. The amounts would also be adjusted for inflation in 2025.

Under current law, domestic research or experimental expenditures must be deducted over five years. This rule applies to expenses paid or incurred after December 31, 2021.
The legislation would change this treatment. It would allow these expenditures to be fully deducted in the year they are paid or incurred. This applies to taxable years beginning after December 31, 2021, and before January 1, 2026.

When calculating the limitation on business interest deductions, the legislation would modify adjusted taxable income. It would allow this income to be determined without considering depreciation, amortization, or depletion.
This change would apply to taxable years beginning after December 31, 2023, and before January 1, 2026. Similar treatment would be available for 2022 and 2023 if a taxpayer elects it.

In recent years, bonus depreciation has been gradually reduced under current law. It reached 80% in 2023 and 60% in 2024.
The legislation would restore 100% bonus depreciation. This would apply to qualified property placed in service after December 31, 2022, and before January 1, 2026.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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