New bills came to life out of the House Ways and Means Committee last week as Republicans moved on a series of bills aimed at reducing taxes. But will the Democrats be willing to play ball?
One of the bills proposes a big jump in the standard deduction starting in 2024 with an additional $2,000 being added to a single filer’s standard deduction and $4,000 on a married filing joint return. The Republican controlled House however, has not wanted to remove the limits on state and local tax deductions that were part of the Tax Cuts and Jobs Act, in spite of the Democrats showing support for such an action.
In addition to the boost for families, the proposed bills also included the Build it in America Act which most notably included language to repeal the required amortization of research and development expenses and allow them to instead be immediate expenses. A welcome boost for businesses.
Additionally, the bill includes a provision to repeal the limit on deducting business interest expenses.
Interestingly, the bill also repeals credits for electric vehicles and other renewable energy credits. A move not likely to be favored by the Democrats.
A key bill that stands to benefit both sides is the Small Business Jobs Act which includes language to reset all the 1099-K reporting requirements back to $20,000 a year and 200 transactions. The IRS has yet to figure out how to manage the unreasonable rule change that would require all payment processors such as PayPal and Venmo to send 1099-Ks to anyone who received more than $600 through the processors in a calendar year.
A move that would have left us all paying our friends back for pizza and coffee in IOUs instead of cash.
The reply from the Democrats last week though was not a positive step forward for these bills as they initially read. The Democrats blasted the bills, pointing fingers and accusing the Republicans of focusing their strategy on the wealthy saying that the poorest American families would benefit the least from the proposed law changes.
The Republicans held fast that the changes proposed were aimed at reducing the impacts from inflation, a much-needed reprieve for many American families right now.
The Senate is still controlled by the Democrats so none of the bills are expected to survive without changes at this point, but the discussions have already started to point towards an interesting end of year tax planning battle as we wait to see what changes make to the finish line.
