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Upcoming Legislation Update: The Tax Relief for American Families Act

By: Jordan Kuhlengel

Tax Partner at HKA CPAs & Advisors

The Tax Relief for American Families Act was approved by the Congressional Ways and Means Committee on January 19th of this year. This bill will retroactively impact the 2023 tax year and may provide tax savings to some of our clients. While it primarily focuses on businesses, there are also provisions for individuals through revisions to The Child Tax Credit.

This bill can still be amended and has not yet passed through the Senate. The highlights below may not be included in the final version, and HKA will provide an update if and when it passes. If it passes and your return is affected, delays on the filing of your return may occur because we will want to be sure that the law is finalized before submitting it. Our tax program will also require updating, which can unfortunately also take some time.

In the event that your return is affected, we will keep in touch with you to be sure that you are aware.

The Impact to Individual Tax Filers:

The Child Tax Credit:
There are some small updates to the calculation of The Child Tax Credit, as well as an set increases to the refundable portion (rather than relying on an inflation adjustment). There is also a provision that will allow taxpayers to use the previous year’s income when calculating the tax credit starting in the 2024 tax year.

Highlights for Business Owners:

Research and Development Expenses (R&D):
The current law requires any expenses claimed for an R&D credit to then be amortized over 5 years. This law went into effect in 2022. The potential changes would allow for businesses to deduct the R&D expenses immediately in the year incurred. The bill is set to impact tax years starting in 2025.

Bonus Depreciation:
Businesses under the current 2023 law allows for 80% bonus depreciation of qualified property placed in service in 2023, decreasing the allowable bonus depreciation by 20% in 2024, 2025 etc. The proposed bill would extend the 100% bonus depreciation retroactively to 2023 and allow continued 100% bonus depreciation deduction through the end of 2025.

Employee Retention Tax Credit:
The main impact to our clients is that the bill will terminate the period for making ERC claims as of January 31, 2024.

1099-MISC and 1099-NEC Filing Thresholds:
The threshold for 1099s will increase from $600 to $1,000 beginning with 1099s required to be filed for the tax year 2024.

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