Dave Danic, Director of Tax at Summit Virtual CFO by Anders, has an update about tax relief implemented by the American Families and Workers Act of 2024.
Hi clients, in this video, I will be discussing the bipartisan proposal for the Tax Relief for American Families and Workers Act of 2024. This proposal includes important provisions for both personal and business taxes, such as section 74 amortization for research and experimentation costs and bonus depreciation. I will also touch on the child tax credit provisions and the ongoing negotiations between Republicans and Democrats. Watch this video to understand how these potential changes may impact you and your business.
Below you can read a transcript of the video:
0:00 Hi clients, my name is Dave, and I'm the Director of Tax Services at Summit Virtual CFO by Anders, and here we go again. Congress is at it, again. As you've probably read in the news, there is a bipartisan proposal for the tax relief for American Families and Workers Act of 2024. What does this mean
0:25 for you? There is a lot of provisions for both personal and business taxes in this bipartisan deal. The most important one for our clients that they've agreed on is something called Section 74 amortization for research and experimentation costs. What they are trying to accomplish in this deal is to retroactively
0:51 go back and say that companies that undergo research costs do not need to amortize those research costs and then can instead write them off in the year that they expense them. What's this mean? Well, a lot of our clients had a big tax increase last year because they had to write off those costs over five
1:13 years. We are crossing our fingers but not holding our breath that this provision will get through because that will allow a lot more deductions for our companies that undergo research. The second element of importance is called bonus depreciation so when the tax cuts and job act in 2018 was put into play
1:34 bonus depreciation was going to go from 100 percent to 80 percent to 60 to 40 to 20. So, what that meant is that when I bought a piece of equipment, I could not write it off in the first year. I could only do 80 percent then it was 60, 40, and 20. So, what congress is hoping to do is to bring back
1:56 that immediate expensing of those costs. So, when I buy equipment, I get the right off in the first year. Currently, we're at the 80 percent section of that depreciation. Then lastly, there are child tax credit provisions, and this is on the personal side so what the democrats want in this deal is an increase
2:16 to the child tax credit which gets money back into the pockets of people that are at the lower income range throughout the year. That is what the republicans and democrats have to negotiate on. Republicans want these business provisions. Democrats want the child tax credit provisions. Will they agree on it?
2:35 We don't know, but we are certainly monitoring this, and we will let you know if there's any changes. Right now, this needs to get fixed by January 29th before tax season. That's 10 days from the recording of this video, so that the IRS can be prepared for these changes in tax code. So, hold on. We don't know
2:57 what's going to happen, but we are certainly hoping this gets done, because we feel that it's going to benefit a lot of our clients. Have a great prosperous and secure 2024.