The Tax Relief for American Families and Workers Act of 2024

Here we go again… Congress is currently (slowly) working on pushing through a bill that would have rules that would be applied retroactively to 2023. The Tax Relief for American Families and Workers Act of 2024 is a bipartisan piece of legislation that passed, overwhelmingly, in the House of Representatives, but is currently stalled getting through the Senate. While many of us expect the bill to pass, the bigger question is when. There is a chance that the bill does not pass until March. It still needs to get through the Senate and then signed off by the President. AND THEN needs to be passed along to the IRS to finalize the forms, AND THEN needs to be handed off to tax software providers to update the systems.

This certainly looks like it could cause substantial filing delays BUT there are some provisions in here that can put more money in our clients pockets so we’re paying very close attention. While there is a lot to this bill we’ve done our best to identify and simplify where our clients may have some exposure to this new bill.

For Individuals (with dependent children):

Expanded access to the child tax credit – The Child Tax Credit (CTC) currently offers a maximum $2,000 tax credit, with only a maximum of $1,600 being refundable. The credit also penalizes families with multiple children as the maximum is solely based on earned income and doesn’t consider the number of qualifying children. The proposed law would:

  • Increase the maximum refundable portion of the credit to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025.
  • Raise the maximum CTC each year to account for inflation starting in 2024.
  • Modify the calculation of the maximum CTC to consider the number of qualifying children, generally increasing the credit. Additionally, for tax years 2024 and 2025, taxpayers can calculate their CTC based on the previous year’s earned income, providing flexibility when income fluctuates.

What this could mean for your 2023 taxes: a larger and more refundable Child Tax Credit.

For anyone that received payments from Norfolk Southern covering losses related to the train derailment:

This bill (as it stands currently) would provide relief from taxation on those payments.  Norfolk Southern issued payments totaling approximately $21 Million to about 4,500 families. This would be a substantial impact to all of those families. The taxability of those payments has potentially broad reaching impacts to things like social security taxability,  government benefit applications and anything that is tied to your Federal Adjusted Gross Income on your tax return.

What this means for your 2023 taxes:
If you received one of these payments, you’ll be receiving a 1099 very soon (if not already). It likely makes sense to delay filing your return until this law passes as it will likely be simpler and more cost effective to file your tax return right the first time rather than amend and wait for the government to pay you back any tax you over paid on an amended tax return. Amended tax returns take much longer to process and can cost additional money to file.

We will be visiting East Palestine to do a series of educational seminars on the taxation of these payments in the coming weeks. If you would like to receive information on these seminars please email Cody Dorman ([email protected]), one of our tax specialists who will be presenting with our CEO Tim Petrey, CPA.

For Businesses:

  • Research & Development (R&D) Expenses – If you have incurred expenses related to U.S.-based Research & Development, the current requirement is to spread the deduction over five years, with only a half-year’s deduction in the year of the expense. The proposed legislation aims to extend this mandate to the tax year 2026, enabling you to deduct the entire amount of R&D expenses from 2023 (as well as 2024 & 2025)!

What this could mean for your 2023 taxes: You can deduct the R&D expenses used for the R&D tax credit, net of the credit.

  • 100% Bonus Depreciation – Originally, the 2023 tax year was slated for a phased-in reduction of the percentage of the cost of qualifying property eligible for Bonus Depreciation. If the legislation is enacted, Bonus Depreciation will be reinstated to 100% through tax year 2025.

What this could mean for your 2023 taxes: You can deduct 100% of the cost of qualifying property or depreciate it over the useful life, depending on what is more advantageous for your situation.

While there are always nuanced stipulations that could impact your specific tax situation, the points mentioned above are the most broadly applicable in the newly proposed legislation. We will continue to monitor this legislation’s progress to ensure you get the most out of your filing this season.

We’re looking forward to hearing from you this tax season and being here to help you navigate this crazy world that we live in 🙂