In June, Utah’s Congressman Blake Moore and Republicans on the Ways and Means Committee passed three new tax bills aimed at providing tax relief to families and businesses. The three bills are packaged as the American Families and Jobs Act. Together, they take aim at providing relief in several different ways on the federal tax level. The three bills cover different areas, which we will explain in more detail.
Tax Cuts for Working Families Act (H.R. 3936)
Currently approximately 9 out of 10 households use the “Standard Deduction” on their federal tax return. HR 3936 would boost the standard deduction by $4,000 for joint filers and $2,000 for single filers through 2025. This would save joint taxpayers in the 10% marginal bracket $400 per year and much more for those in higher marginal brackets. The bonus deduction would phase out for higher income earners.
Small Business Jobs Act (H.R. 3937)
The Small Business Jobs Act would permanently lift the maximum Section 179 expensing deduction to $2.5 million from the current $1.08 million and raise the phase out threshold from $2.7 million to $4.0 million. This would immediately impact small businesses around the country in incentivizing additional purchases of equipment and investments that are the lifeblood of a strong economy.
HR 3937 also reverses the damaging effects targeted at gig workers of the previously passed ARPA (American Rescue Plan Act) during COVID when the reporting requirement for third party network transactions were lowered all the way down to $600. This was going to create a reporting and enforcement nightmare for many small businesses and taxpayers before the IRS delayed implementation of this rule in December of 2022. This legislation increases that threshold to $5,000. The previous rule was 200 transactions or $20,000.
Build It in America Act (H.R. 3938)
The Build It In America Act would temporarily cancel three tax changes that have been looming from the 2017 TCJA (Tax Cuts and Jobs Act) and extend them to align with the expiring provisions in 2025:
- Restores 100% deduction of R&D (research and development) expenses
- Expands interest deduction limits
- Restores 100% bonus depreciation for businesses instead of the current phase out
These three prongs would reignite economic activity and provide certainty for American businesses for at least the next 2 years as tax policy beyond 2025 is debated in the halls of Congress. If these changes are not implemented, in a high inflation environment, the loss of these deductions steeply increase the after tax cost of investment.
For raising revenue to offset the proposed tax relief, the bill also pulls back IRA’s (Inflation Reduction Act) massive green energy tax credits. These changes include repeal or modification of the clean energy production credit, the clean electricity investment credit, the previously owned clean vehicles credit, the clean vehicle credit, and the qualified commercial clean vehicle credit. In all, the Joint Committee on Taxation (JCT) estimates the changes to green energy credits would raise $216 billion from 2023 through 2033.
Together, the three bills that compromise the package will need to work their way through the House floor and hopefully settle differences on any SALT (State and Local Tax) deduction changes from the current $10,000 limit and any other points of contention. In the meantime, taxpayers should thank Representative Moore and the Ways and Means Committee and urge other members of Congress to get behind this important legislation.