We are keeping an eye on two tax packages approved by the House Ways and Means Committee on June 14.
The Build It in America Act (H.R. 3938) retroactively extends, through 2025, some TCJA provisions that expired as of 1 January 2022, including:
- The IRC Section 174 deduction for R&E expenses
- The IRC 163(j) limitation on interest expense deductions (using earnings before interest, taxes, depreciation, and amortization (EBITDA) as the threshold, instead of earnings before interest and tax (EBIT))
- 100% bonus depreciation
The Small Business Jobs Act (H.R. 3937) increases the maximum IRC Section 179 small business expensing amount to $2.5m and phase-out threshold amount to $4m.
It’s important to note the above tax bills aren’t expected to be enacted as-is. There will be much negotiation and my guess is we won’t see final legislation until late December. You can read more about the bills and expected negotiations in the June 14 2023 EY Tax News Update.
What does this mean for Sage Fixed Assets?
The two items of key interest are the 100% bonus (also called the 168(k) Allowance) and Section 179. Our application conforms to the current law, where:
- 80% bonus is in effect for assets PIS in 2023. 60% bonus is in place for assets PIS in 2024.
- Section 179 expensing is $1.16m for fiscal years beginning in 2023. This will be inflation indexed for 2024.
- Section 179 threshold is $2.89m for fiscal years beginning in 2023. This will be inflation indexed for 2024.
As always, we’ll watch Congress and incorporate any tax law changes into our 2024.1 tax release, which is currently planned for January 2024. We are here for you to ease your tax compliance burdens and analysis of retroactive tax changes!