Several legislators in Congress, coming from both political parties, are showing bipartisan support for new tax cut deals despite the country’s current record high national debt. Although the proposed legislation aims to help cash-strapped Americans and businesses, the bill is headed toward tough negotiations in the 2024 sessions.
In light of the first time, record-high $34 billion national debt faced by the federal government, it’s likely that house floor discussions will focus on fiscal responsibility over the reduction of deficit and debt to work out a more sustainable level of economic stability.
The proposed tax cuts will involve laws related to three Trump -era business tax reductions. These will be paired off with the Democratic proposal to return the pandemic-related American Rescue Plan Child Tax credit that ended in December 2022.
Trump-Era Tax Credits to Be Pushed for Renewal in the 2024 Congressional Sessions
Republican lawmakers are pushing for the revival of three expired or phased out business tax credits the party introduced via a 2017 GOP-sponsored law. Yet sources say that negotiations for their bipartisan renewal will call for a broader set of provisions.
The first business tax credit being pushed for revival pertains to the outright expense of research and development costs in the tax year incurred.
After the lapse of this tax credit in 2022, recognition of research and development expenses reverted to the standard practice of amortizing the costs within a 5-year period.
The second tax deduction provision being pushed for renewal also ended in 2022. Previously, businesses were allowed to reduce their taxable revenue for the year by deducting in full the costs of short term investment. Some examples of short term investment costs are building construction costs, machinery and equipment acquisition costs, incurred in the same tax year. In 2023, business entities can only deduct up to 80% of the related costs.
The third tax credit included in the renewal proposal is the recognition of taxable earnings after deducting up to 30% of interests, taxes, depreciation and amortization. In 2022, the tax law reverted to the standard practice of basing taxes on EBITDA or earnings before the aforementioned expenses.
Comprehend that the greater the amount of deductions allowed the lower the income on which tax payment due for the year, will be calculated.