3 Upcoming Tax Changes That Could Affect Your Wallet
It’s 2024: Rate Cuts AND Tax Cuts are on the table
In 2024, Rate and Tax Cuts are potentially on the horizon.
Let’s dive in.
The U.S. House of Representatives’ Ways and Means committee on Friday afternoon approved the proposed “Tax Relief for American Families and Workers Act of 2024,” which includes provisions that could directly impact you.
For this legislation to go into effect, it will need to be taken up by the full House, passed by the Senate, and ultimately signed into law by the President.
Congress appears likely to pass the Act in the coming days. After all, when is it a better time to pass sweeping tax relief than during an election year?
*This is not tax advice and you should consult with your tax professional before making any major decisions*
1. Expansion of the Qualified Business Income Deduction (QBID):
The Act increases the QBID deduction from 20% to 25% for qualified business income from pass-through entities like sole proprietorships, partnerships, S corporations, and certain trusts and estates.
This change effectively reduces taxable income for many business owners, potentially leading to significant tax savings.
However, there are limitations and eligibility requirements to qualify for the full deduction, so business owners should consult with a tax advisor to determine their specific situation.
2. Modification of Research and Development (R&D) Expensing:
The Act permanently extends the 100% expensing of research and development costs, which was previously set to expire at the end of 2023.
This would allow businesses to deduct the full cost of R&D expenses in the year they are incurred, rather than amortizing them over several years.
This change can provide a significant cash flow benefit for businesses engaged in R&D activities, potentially making it easier to invest in innovation and development.
3. Increase in the Depreciable Basis for Qualified Property:
The Act increases the depreciable basis for qualified property by 100% for certain assets placed in service after December 31, 2023, and before January 1, 2026.
This means businesses can deduct a larger portion of the cost of qualified assets, such as machinery, equipment, and buildings, in the year they are placed in service.
This change could accelerate depreciation deductions, potentially lowering taxable income and offering tax savings in the near term. This could be significant for those that have done cost segregation studies in the past who were expecting a drop in rates.
It's important to note that this is not an exhaustive list, and the Act contains many other provisions that may impact businesses in different ways.
If you’d like to read the full text you can read it here: https://www.finance.senate.gov/imo/media/doc/the_tax_relief_for_american_families_and_workers_act_of_2024_technical_summary.pdf
Thank you for reading and I am grateful and humbled to be able to learn, grow, and invest alongside you at Tuttle Ventures.
Vision, courage, and patience leads to successful investing.
Darin Tuttle, CFA
NOTE - This is not investment advice. Do your own due diligence. I make no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information contained in this report. Any assumptions, opinions and estimates expressed in this report constitute my judgment as of the date thereof and is subject to change without notice. Any projections contained in the report are based on a number of assumptions as to market conditions. There is no guarantee that projected outcomes will be achieved. Unless there is a signed Investment Management or Financial Planning Agreement by both parties, Tuttle Ventures is not acting as your financial advisor or in any fiduciary capacity.