Tax Relief On The Way?

This week Jason Smith (R), the House Ways and Means Committee Chair and Ron Wyden (D), the Senate Finance Committee Chair announced a bi-partisan agreement they called “The Tax Relief for American Families and Workers Act of 2024.” The proposed legislation includes some significant changes that could provide some tax relief for transportation and logistics companies.

The proposed legislation would include the following:

• Revives 100% bonus depreciation for property placed in service after December 31, 2022 and before January 1, 2026.
• Retroactively restores the ability to deduct research and experimentation costs that were required to be capitalized beginning in 2022 under Section 174.  Many companies saw severe negative tax implications from requirement to amortize these costs instead of allowing immediate deduction. Section 174 capitalization would merely be delayed until 2026.
• Section 163(j) related to the limitation of the business interest deduction would also be changed to allow depreciation and amortization back into the limit calculation as had been the case prior to the 2022 tax year.  Many taxpayers got trapped in an addback of their interest expense because of the increase in interest rates.
• Changes the refundable portion of the child tax credit from $1,600 per qualified child to $1,800 per qualified child in 2023, $1,900 in 2024 and $2,000 in 2025, along with an inflation adjustment to the general $2,000 total credit amount for 2024 and 2025.
• Increase in the Section 179 deduction limit to $1.29 million, reduced by the amount by which the cost of acquired assets exceeds $3.22 million.  Both amounts are adjusted for inflection for taxable years beginning in 2024
• Shortens the period for taxpayers to file Employee Retention Credit (ERC) claims where the IRS would not accept claims filed after January 31, 2024 (currently taxpayers have up until April 15, 2025).

Keep in mind that this is draft legislation and has not been passed yet. There is speculation that this legislation would need to be attached to a larger bill, so think of the upcoming budget bills potentially. This means that it could be a while before we know if this will get some traction which may put taxpayers in a potentially difficult position. If we get into February or early March and there is still talk about this legislation getting added to a broader bill, taxpayers may want to consider extending their return. Both from the sense of there will likely be significant filing and processing delays from the IRS and software companies to update for the retroactive portions of the proposed legislation, and it would save them from potentially having to go back to amend their returns down the road.

While nothing is final yet, it appears that this could certainly help provide some tax relief to an industry that’s been struggling as of late.