Individual Tax Relief:

The proposed legislation introduces a significant boost to the child tax credit, benefiting families nationwide. A notable enhancement is the introduction of a refundable portion determined per child, providing a clear advantage for expanding families.

The existing child tax credit stands at $2,000 per child for eligible taxpayers. Currently, a portion of this credit, up to $1,600 in 2023, can be refunded, with limitations based on the number of qualifying children and the taxpayer’s earned income. The proposed law seeks to calculate the refundable amount individually for each child, resulting in a total refundable amount for the tax years 2023-2025. Moreover, the maximum refundable credit will increase to $1,800 (2023), $1,900 (2024), and $2,000 (2025), with adjustments for inflation from 2024 onward.

Notably absent from this legislation is a provision addressing the state and local tax deduction, capped at $10,000 by the 2017 Tax Cuts and Jobs Act. Advocates had hoped for an adjustment to the married filing joint cap to alleviate the marriage penalty.

Business Tax Relief:

The legislation supports America’s innovative spirit with provisions to defer the capitalization and amortization of research and experimentation expenditures. It also extends the 100-percent bonus depreciation for properties in service before January 1, 2026.

For the business sector, the Act increases the Code Sec. 179 deduction limitation and expense limitation for property placed into service post-2023. The law reintroduces depreciation, amortization, and depletion into the adjusted taxable income calculation for tax years starting after December 31, 2023, and before January 1, 2026.

The Act extends 100-percent bonus depreciation for property placed in service before January 1, 2026, and increases the Code Sec. 179 deduction limitation to $1.22 million in 2024, with a reduction for expenses exceeding $3.05 million.

Employee Retention Credit:
The Employee Retention Tax Credit (ERTC), established during the COVID-19 pandemic, provided businesses with a credit against certain payroll taxes. The proposed bill aims to combat fraudulent claims by increasing penalties for COVID-ERTC promoters, extending the limitations period on assessments of ERTC claims to six years, and imposing reporting requirements on promoters. The bill sets January 31, 2024, as the deadline for making ERTC claims.

Other:

To ease compliance burdens on businesses, the Act raises the filing threshold for Form 1099-NEC and 1099-MISC from $600 to $1,000 for payments post-December 31, 2023, with adjustments for inflation.

In Summary:

The Tax Relief for American Families and Workers Act of 2024 is a comprehensive package addressing various aspects of the American economic landscape. It aims to promote economic growth, support independent contractors and businesses, and tackle housing affordability concerns. While the House’s approval is a significant milestone, the Act awaits Senate approval to become law. Stay tuned for updates on the upcoming Senate proceedings.