The tax bill put forth a few weeks ago, the Smith-Wyden Tax Act, has the potential to bring about significant changes for both individual and business taxpayers in 2024 and possibly even retroactively to 2022 and 2023. Although the bill passed the House, it is currently stalled in the Senate. Here’s a highlight of the tax provisions that we believe will be most impactful to our clients:

R&D Expense Correction:

• Restores full and immediate expensing for businesses’ research and development expenditures.
• Reverses the five-year amortization requirement implemented in 2022.
• Retroactively applies R&D expensing to investments made from 2022 through 2025.
• Incentivizes business investments, enhancing productivity and economic growth.

Child Tax Credit Expansions:

• Enhances refundability of the Child Tax Credit (CTC) to support low-income families.
• Ensures parents receive a portion of the credit even without federal tax liability.
• Retains work incentives, such as the earned-income phase-in.

Bonus Depreciation Reinstatement:

• Reinstates 100% bonus depreciation from January 1, 2023.
• Reverses phased reduction under TCJA to 80% in 2023 and 60% in 2024.

Business Interest Expense Limitation:

• Reinstates allowance for depreciation and amortization for the 30% limitation on interest deductions.
• Makes allowance retroactive from January 1, 2023, or January 1, 2022 if elected by the taxpayer.

Section 179 Small Business Expensing Cap:

• Increases small business write-off limit to $1.29 million, surpassing the 2017 cap of $1 million, for property placed in service after December 31, 2023.
• Makes additional adjustments for inflation after 2024.

We will continue to monitor the Act – whether it continues to move through Senate or stalls. Given the proximity to the tax filing due date for calendar year entities, we are advising our affected clients to extend their 2023 tax returns to avoid possible amendments to their returns should the Act pass on a retroactive basis. If you have any questions on how the Act may impact your tax situation, please call us at 630-953-4900.