A standalone tax bill is unlikely this year, but major tax provisions might be attached to an omnibus spending bill that will likely occur before year-end. There are several provisions that either Republicans or Democrats want to see happen.
The Republicans would like to see the following:
Eliminate the five-year amortization of research and development expenses. The Tax Cuts and Jobs Act now requires these expenses to be amortized and many companies are complaining about this cost. However, once five years goes by the cost is minimal, but for now there is pain. This may be reinstated retroactively to January 1, 2022.
Make bonus depreciation 100% deductible through 2025 and then have it drop to zero in 2026. Currently it is 80% this year, then 60% next year and so on.
Allow depreciation and amortization to be a deduction when calculating the limit on business interest.
Many Republicans would also like to make the temporary Tax Cuts and Jobs Acts changes such as Section 199A permanent. However, this is expected to cost $3.3 trillion over 10 years.
The cost to the federal government of the increase in interest rates is at least an extra $1 trillion per year for every 3% increase. I find it hard to believe that cuts in revenues are going to popular in Congress.
On the Democrat’s side, their primary wish is to expand the child tax credit to $3,000/$3,600 for qualifying children. Remember that the child tax credit will revert to $1,000 starting in 2026.
We will know by year-end if any major tax law changes are coming. But until then, it is murky and will remain that way until the end.
