February 01, 2024

Important Update: 2024 Tax Season and Potential Major Tax Law Changes

Are you aware of the potential major tax law change that could significantly impact 2023 tax returns for businesses and real estate owners. It is important to stay informed on any potential changes to the 2023 tax law so you can plan accordingly and prepare your returns accurately.


Understanding the Legislative Process

Each year, Congress discusses numerous tax ideas, but few become law. However, MS Consultants believes that the "Tax Relief for American Families and Workers Act of 2024" stands a good chance of being enacted by March this year.

Remember, all Tax Bills originate in the House’s Ways and Means Committee, proceed to the House for a vote, then move to the Senate Finance Committee for further discussion, and finally to the Senate for a vote. Presidential approval is the last step.

The "Tax Relief for American Families and Workers Act of 2024" passed the House last night with strong Bi Partisan Support. It previously passed the House Ways and Means Committee with a 40-3 bipartisan vote, gained approval from Senate Finance Committee Chair Ron Wyden, and received support from both Senate Majority Leader Chuck Schumer and the White House. Despite this, many commentators believe it may need to be attached to other essential legislation to ensure its passage, potentially delaying its enactment until March.

Key Changes to Watch For

Should this bill pass, here are some changes that could affect Real Estate Owners:

1. 100% Bonus Depreciation: This would extend to 100% for tax years 2023 – 2025. Currently, for 2023, it stands at 80%. Note the significant drop to 20% in 2026 and 0% in 2027.

2. Sec. 163(j) Business Interest Deduction: thru 2021, this deduction was limited to 30% of EBIDA (earnings before Interest, Taxes Depreciation and Amortization). Starting in 2022, taxpayers were limited to 30% of EBIT. This Bill would allow taxpayers to go back to using EBIDA for tax years beginning in 2022.

3. Sec. 179: A minor proposed change could increase the 2024 Sec. 179 deduction from $1,220,000 to $1,290,000, and the asset limitation from $3,050,000 to $3,220,000.

4. Domestic Research and Experimental Expenses: The bill proposes to delay the amortization of these expenses until 2026, allowing for immediate expensing. However, costs incurred outside the U.S. will still need to be amortized over 15 years.

5. Low Income Housing Credit: The bill aims to increase the LIHC back to the 2018-2021 State Ceiling rates for 2024 – 2025 and decrease the private activity bond threshold for 4% LIHTC from 50% to 30% for the same tax period.


Staying Ahead

MS Consultants is committed to keeping you informed about crucial law changes and potential alterations that could impact your clients and industries. Stay tuned for more updates as we navigate these changes together.