House Passes Bill to Extend Parts of TCJA | Citizens Against Government Waste

House Passes Bill to Extend Parts of TCJA

The WasteWatcher

In a rare display of bipartisanship, the House of Representatives passed H.R. 7024, the Tax Relief for American Families and Workers Act, which would extend and expand several business tax provisions and reform eligibility for the child tax credit.  The legislation also addressed disaster relief and affordable housing.  The tax provisions were originally included in the Tax Cuts and Jobs Act (TCJA), which was signed into law by President Trump in 2017.   The legislation was passed on January 31, 2024, by a 357-70 vote.

The tax package extends and reforms several provisions that would increase business investment and economic growth.  The bill allows for immediate deduction of the costs of U.S.-based research and development, instead of businesses having to wait five years to deduct these expenses.  The package also allows for 100 percent expensing for business investments in items like machines, equipment, and vehicles and gives businesses greater flexibility in deducting interest expenses.  Business owners who were forced to borrow to expand their business or cover their payroll have had to face high interest rates.  With this legislation, they will have more flexibility to choose between borrowing money or cutting jobs.

The legislation also includes targeted provisions for small business owners.  It increases the amount of investment that a small business can immediately write off from the $1 million that was in the TCJA to $1.29 million.  The bill also makes the first adjustment for reporting subcontractor labor since the 1950s, raising the threshold from $600 to $1,000.  Small businesses are crucial to the economy and these provisions give them greater flexibility and tax relief.

 H.R. 7024 also includes changes to the child tax credit (CTC).  The TCJA doubled the allowed credit, raised the refundable portion to $1,400, and included work requirements to claim the credit.  The Tax Relief for American Families and Workers Act also includes work requirements and other guardrails for CTC recipients and increases the refundable portion of the CTC from 2023-2025 with an adjustment for inflation starting in 2024.  The main change in the CTC under H.R. 7024 is the one-year income lookback, which allows recipients to use either their current year or previous year income to calculate their total CTC amount for 2024 and 2025. 

The bill does not raise the cap on state and local tax (SALT) deductions.  The SALT deduction allows taxpayers to deduct the total they paid in state and local taxes from their federal taxes.  While this deduction is available to all taxpayers, it is predominantly used by wealthy taxpayers in high-cost-of-living, blue states like California, New Jersey, and New York.  Members of Congress from these states have long pushed for raising the cap to $20,000 or eliminating the cap altogether but so far their efforts have been unsuccessful.

The Tax Relief for American Families and Workers Act is a commonsense, bipartisan tax bill that extends and reforms several crucial tax provisions that were enacted in the TCJA.  While the bill’s fate in the Senate remains up in the air, this legislation is a good start toward extending other provisions of the TCJA when they will need to be extended in 2025.  

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