Lawmakers Release Framework on Potential Tax Relief for American Families and Workers Act of 2024

The anticipated $78 billion bipartisan deal contains benefits for both individuals and families as well as businesses. One “side” of the deal contains provisions to extend a series of tax breaks for businesses. The other side pertains to the expansion of the child tax credit.

Business provisions included in the proposed deal

The package would include some revived tax deductions for businesses such as:

• Extension of 100 percent bonus depreciation for qualified property placed in service after Dec. 31, 2022, and before Jan. 1, 2026. 20 percent bonus depreciation would remain in place for property placed in service after Dec. 31, 2025, and before Jan. 1, 2027
• Delay of the five-year deduction requirement for research or experimental costs paid or incurred until Dec. 31, 2025. Taxpayers would now be able to deduct research or experimental costs that are paid or incurred beginning after Dec. 31, 2021, and before Jan. 1, 2026
• Increased enforcement and penalties related to the Employee Retention Credit. More importantly, the provision forbids additional Employee Retention Credit claims after Jan. 31, 2024 (the original date was April 15, 2025).

There are several other provisions included that focus on innovation, global competitiveness, natural disaster assistance, affordable housing and eliminating fraud.

Expansion of the child tax credit

The other side of the deal would partially revive the expanded child tax credit from 2021.  Nothing is finalized yet, but among the provisions in the expanded credit are:

• The credit could be claimed for each child instead of just one, using a modified calculation that multiplies earned income (in excess of $2,500) by 15 percent and multiplies that amount by the number of children. This new policy would be effective for 2023, 2024 and 2025.
• The maximum refundable child tax credit would increase to $1,800 for tax year 2023, $1,900 for 2024 and $2,000 for 2025. An inflation adjustment would also be applied for tax years 2024 and 2025.
• Taxpayers may elect to use earned income from the prior taxable year to calculate the maximum refundable child tax credit if current year’s earned income is less than a prior year.

Funding and implementing the credit before the upcoming filing season

The proposed deal would be paid for partially by clawbacks from the embattled Employee Retention Credit that was also introduced at the height of COVID-19 to incentivize employers to retain employees. Brokers of the deal are targeting January 29, the official start of the tax filing season, so that taxpayers can claim the credit this filing season. The IRS has emphasized that late-breaking tax changes are nothing new and that they will be prepared to do what is necessary to make the credit work.

The legislation has not been finalized, and specific details may change as it travels through the approval process. The tax specialists at UHY will continue to communicate any changes or progress of the potential legislation.