New Tax Relief Bill Could Affect 2023 Filing Season

A bipartisan deal known as the Tax Relief for American Families and Workers Act of 2024 could offer a last-minute extension for previously expired tax credits and breaks. If passed, provisions could affect the current 2023 filing season.

Update 2.1.24: Last night, the U.S. House of Representatives passed a bipartisan $70 billion tax relief package. The Tax Relief for American Families and Workers Act of 2024 passed the House with a vote of 357-70, with ‘no’ votes coming from ultra progressive and conservative members for different reasons. The bill now moves on to the Senate. The timing of when the Senate would take up the bill is unclear. However, Senate leaders are hoping to get the act passed as soon as possible so provisions in the bill can apply to the 2023 tax filing season.

Last year many companies experienced cash flow issues due to unexpected tax bills. This was related to the change that required capitalizing and amortizing domestic research and experimental expenditures over five years as opposed to deducting them in the year of the expense. This deal would extend the taxpayer’s ability to deduct these expenses in the year occurred until 2026. If passed, this change would be retroactive to last year and businesses and taxpayers will want to explore options for recouping last year’s unexpected tax bill.

Another positive for businesses within the deal would be the extension of 100 percent bonus depreciation. This was set to go to 80 percent starting in 2023 and was going to phase out another 20 percent each calendar year.  With this deal, 100 percent bonus depreciation would be in place until the end of 2025.

Additional provisions of note include:

• Tighter filing deadline on Employee Retention claims, which could potentially move to January 31, 2024.

• An increase in the Child Tax Credit, which is currently at $1,600 for the 2023 tax year and earmarked to increase to $1,800 effective immediately. Incremental increases to $1,900 for the 2024 tax year and $2,000 for 2025 were also included.

While this bill would still need congressional approval, it is quickly gaining momentum. Lawmakers hope to get the deal in place before January 29, 2024 to ensure its relevance in the 2023 tax season. Still, extensive changes so close to the tax filing season could have a significant impact on tax filers and preparers alike, potentially delaying 2023 filings and requiring amendments to 2022 filings. AAFCPAs will continue to monitor this case along with future related rulings and legislation.

If you have questions, please contact Matthew Lougee, CPA, MSA, Tax Manager at 774.512.4195 or mlougee@nullaafcpa.com—or your AAFCPAs Partner.