The Tax Relief for American Families and Workers Act of 2024 was approved by the House of Representatives on January 31, 2024. This legislation brings about beneficial tax modifications for both entrepreneurs and real estate investors.
Because we want to keep you informed and we are in the midst of tax season, we wanted to make you aware of this potential change that may impact your financial situation and taxes. We, along with our partners, are closely monitoring the progress of The Tax Relief for American Families and Workers Act of 2024 and will take the necessary steps to ensure your 2023 Schedule K-1 is accurate and compliant with the latest legislation.
In the meantime, we encourage you to stay in touch with your tax advisors for guidance on how to navigate this situation effectively. Your financial well-being is our top priority, and we are committed to keeping you updated every step of the way. Thank you for your understanding and cooperation during this process.
On January 31, 2024, the Tax Relief for American Families and Workers Act of 2024 was passed by the House with a vote of 357 – 70. This bill encompasses various tax provisions, including retroactive regulations that affect tax returns, notably the 100% bonus depreciation on qualifying property placed in service in 2023. Although bonus depreciation began to phase out at 80% in 2023, this legislation aims to extend it to 100% for the 2023 tax year and beyond.
The bill has successfully passed the House and is now pending in the Senate. However, as of February 19, 2024, the Senate has yet to formally discuss the bill, starting a two-week recess for President’s Day. It is anticipated that the Senate may not commence discussions on the bill until early March.
If the bill is enacted into law, your 2023 K-1 will need to be revised for any properties owned by an LLC that qualifies for bonus depreciation in 2023. In collaboration with some of the partners we work with, particularly Rise48, we have moved forward to prepare current returns based on the existing 80% bonus depreciation law; any approved changes will prompt the update and re-issuance of your K-1 once our tax advisors incorporate the necessary adjustments. This process may take several weeks and involves procedural guidance from the IRS, updates to tax software, recalculations of workpapers, and reprinting/reissuing of the K-1s.
We do not have control over the legislative actions or the timing of the bill. Rest assured, we are closely monitoring the situation and will collaborate with our tax advisors to implement the required changes promptly, should the bill pass. In the event that the bill does not pass, the initially issued K-1s will remain final without any alterations.
In collaboration with some of the other partners we work with, particularly for our STR funds and others, we have decided to hold on preparing the Schedule K-1’s until we have a clear answer on this bonus depreciation law and how it will affect properties placed in service in 2023. This will allow us to minimize any costs associated with changes to the K-1’s per this potential change to the law.
We acknowledge any potential frustration caused by this delay. We recommend that each investor consult their tax advisor regarding filing an extension and stay updated on Congressional developments concerning the bill. While we cannot influence the situation, we hope for a swift resolution from Congress, recognizing the anticipation of millions of taxpayers awaiting the outcome.
**For more info, please refer to the links to news articles below discussing the bill’s implications and the official bill overview from Congress.
The bill currently sits with the Senate which reconvenes Monday, February 26, 2024 .
Numerous senators have expressed a desire to modify the existing bill. It is also likely this bill will not stand alone, but will be linked to the appropriations bill which is due around the government funding deadlines of March 1st and March 8th.
If this is the case, the bill will go back to the House for a vote before it goes to the President’s desk.
Since the suggested tax adjustments retroactively affect 2023, we suggest considering an extension with your tax advisor. This will allow you to wait for the Senate vote and the potential enforcement of these tax changes.
Specific provisions in the bill:
Extension of 100% bonus depreciation. The bill delays the beginning of the phaseout of 100% bonus depreciation from 2023 to 2026. Without this retroactive treatment, bonus depreciation would be 80% in 2023 and 60% in 2024.
Deductions for R&D.
Increased expensing of business assets via IRC Sec. 179.
Child tax credit.
Taiwan double taxation relief.
Disaster relief.
Low-income housing.
1099 thresholds increased.
Employee Retention Credit.
*Sources
https://www.congress.gov/bill/118th-congress/house-bill/7024