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Senate Rejects Tax Relief Bill – What Does This Mean for You?

Senate Rejects Tax Relief Bill – What Does This Mean for You?

After months of back-and-forth, the U.S. Senate has failed to pass HR 7024, the "Tax Relief for American Families and Workers Act of 2024." Unfortunately, this outcome means several proposed changes to the tax code won't happen, and this may impact your personal or business taxes.

For Your Business:

  • R&D Costs: If your business invests in research and development, you'll still need to deduct these expenses over five years. Previously, you could deduct the full amount in the year you incurred them, but that’s no longer an option.

  • Bonus Depreciation: The scheduled phase-down of bonus depreciation will proceed as planned. For eligible property placed in service in 2023, you can deduct 80% of the cost. For 2024, the eligible bonus depreciation will be 60%, of the cost, but this benefit decreases to 40% next year and continues dropping until it phases out completely by 2027. This could mean higher tax bills and less capital for your business to grow.

  • Section 179 Expensing: If you’re a small or medium-sized business owner, the current limits on Section 179 expensing will stay the same. This might restrict your ability to immediately write off the full cost of certain properties.

  • Interest Deductions and Housing Credits: The rules for business interest deductions aren’t changing, and there won’t be any new incentives for developing affordable housing, which might affect any real estate ventures you're considering.

  • Reporting Requirements: The threshold for filing Forms 1099-MISC and 1099-NEC won’t increase, meaning you’ll still need to report payments of $600 or more, as before.

For You Personally:

  • Child Tax Credit: If you were hoping for a boost in the child tax credit, that’s off the table. The credit will remain at $2,000 per child and won’t be adjusted for inflation. This could affect your family’s tax refund.

  • Disaster Relief: Proposed tax breaks for individuals affected by disasters won’t be happening. This means there won't be any special treatment for disaster-related losses, and certain wildfire disaster relief payments will still be considered taxable income.

  • International Tax Rules: If you have income tied to Taiwan, there won’t be new tax rules or agreements to help avoid double taxation.

What’s Next?

With HR 7024 failing to pass, you’ll need to plan ahead, knowing that the existing tax rules will stay in place. If you extended your 2023 tax filings, it’s time to move forward and complete them, as the anticipated changes won’t be coming. As you prepare for 2024, it’s a good idea to consult with your tax advisor to strategize around these developments.

If you have any questions or need personalized advice on how this impacts you, don’t hesitate to reach out to our team at Aldridge Borden. We’re here to help you succeed sooner!