Dear Clients:
Last week the House of Representatives passed a tax bill (Tax Relief for American Families and Workers Act). The Senate and President are expected to pass and sign the bill, BUT NOT UNTIL MARCH. The bill has portions of it that are retroactive back to 2023. That’s correct, they have decided to pass a tax bill during tax season and after the end of the year. There are three main points that affect 2023: Child Tax Credit, 100% Bonus Depreciation and the R&D tax credit. The bill would extend 100% bonus depreciation for property placed in service through December 31, 2025. It also delays the requirement of research and development expenses to be capitalized and amortized until tax years beginning after December 31, 2025.
The main area that will cause issues in filing 2023 tax returns is for businesses and taxpayers that purchased equipment or vehicles in 2023 and will be taking bonus depreciation on those assets. This will cause us to wait until the tax bill is signed and the IRS has updated their computers before we can file tax returns that will utilize bonus depreciation for 2023. We have heard this could take the IRS 12 to 14 weeks to update their computers AFTER the bill is signed.
Congress has known about the phaseout of bonus depreciation since 2018, but they have decided to wait until now to fix it.
We do not know if the proposed changes to the Child Tax Credit will delay filing. The IRS has said anyone filing before the bill is signed will automatically receive an additional refund.
Even though the bill has not been signed into law, we wanted to make you aware of this issue now, and the potential for delays in the filing of your tax return(s).
-Chuck Nelson, of Nelson & Nelson
