The Tax Relief for American Families and Workers Act of 2024, announced by the House Ways and Means Committee on January 16th, holds the potential to significantly affect taxpayers through a wide range of provisions. The intended aim of this bill is to overall reduce the tax burdens for American families and businesses. Yet, the effectiveness of these changes rests heavily on the administrative capacity of the IRS.
The legislation suggests alterations to the child tax credit, research and development expenses, and employee retention credit along with restoration of 100% bonus depreciation and a suggested raise in the business interest expense deduction potential. Key details of these changes are yet to be established.
The proposed modifications to the Child Tax Credit (CTC) could impact millions of families. These changes would temporarily extend access to child tax credits, with potential for the credit value to increase beyond the current $2,000 per qualifying child under 17. However, the impact of these changes will depend on the IRS’s ability to promptly and accurately implement the changes.
The Tax Cuts and Jobs Act of 2018 established several temporary tax incentives for US businesses, most of which are currently winding down. The new reform package is expected to reinstate some of these provisions.
The American Institute of Certified Public Accountants has previously requested a delay to the capitalization-amortization rule for domestic research expenses under Section 174 of the tax code, which has been impacted by the TCJA, until the end of 2025. The current legislative proposal seeks to deliver exactly that.
Changes to the management of Employee Retention Credit (ERC) claims are also projected. This could give the IRS additional time to investigate fraud, whilst protecting borderline cases from extreme penalties.
According to Michael D’Addio, principal in Marcum’s tax and business services practice, the bill’s potential to reshape the financial landscape demands careful attention from taxpayers, businesses, and tax professionals. It’s likely these parties will need to realign their tax planning strategies according to the new provisions. Again, the specifics of this implementation and the ability of the IRS to manage this transition smoothly will be critical in determining the impact of these changes.
Disclaimer: This article does not reflect the opinions of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its associates.