The tax legislation passed by the House of Representatives last month contained extended tax breaks for businesses and an enhanced child tax credit for millions of lower-income families, but the latter may be changed when the Senate takes up the bill, Accounting Today reported.
The Senate Committee on Finance has not started a markup of the $78 billion bill yet, but its ranking member, Sen. Mike Crapo, (R-Idaho), has indicated that he would seek to make changes to it, the Spokane Spokesman-Review reported earlier this month.
"Now that the House has passed H.R. 7024, the Senate will go through its own process," Crapo stated after the bill’s passage. "I look forward to working with my colleagues to vet the legislation, address concerns, and make the necessary changes to build support."
Sen. Ron Wyden (D-Ore.), the Finance Committee chair, is continuing to have discussions with Senate Majority Leader Chuck Schumer, (D-N.Y.) and with his colleagues on finding the best path forward that gets the bill passed quickly and signed into law, his spokesman told Accounting Today. No decisions have been made regarding changes or a markup in committee but, with 357 votes in favor of the bill in the House, the senator feels there's going to be strong support in the Senate, according to his spokesperson.
According to a spokesperson, Sen. Chuck Grassley (R-Iowa), a former Finance Committee chair “looks forward to providing legislative input when the Senate Finance Committee holds a markup—an important step to ensure Republicans on the committee have a chance to weigh in."
The bill would incrementally raise the amount of the child tax credit, which is currently $2,000 per child, but not all of it is is refundable, The Associated Press reported in late January. The legislation would incrementally raise the amount of the credit that is available as a refund, increasing it to $1,800 for 2023 tax returns, $1,900 for the following year and $2,000 for 2025 tax returns. The bill would also adjust the topline credit amount to temporarily grow at the rate of inflation, and keep a threshold of a household having $2,500 in income to be eligible for refundable child tax credit payments.
The IRS has been telling taxpayers not to await the final outcome of legislation as they prepare their tax returns for filing.
"We urge and encourage taxpayers to file when they're ready," IRS Commissioner Danny Werfel said on Jan. 26, in announcing the beginning of tax season. "Don't wait on Congress. If there's a change that impacts your return, we will make the change and we will send you the update, whether it's an additional refund or otherwise, without you having to take any steps."
Another complication involves the state and local tax (SALT) deduction, which was capped by the Tax Cuts and Jobs Act of 2017 at a maximum of $10,000 per taxpayer. Congressional Democrats and Republicans in high-tax states such as New York, New Jersey and California have repeatedly called for increasing that capped amount.
Legislation that would increase the $10,000 cap passed the House of Representatives’ Rules Committee on Feb.1. The bill, sponsored by Rep. Michael Lawler (R-N.Y.), would raise the cap to $20,000.
The deduction would apply only for married couples who file taxes jointly and made up to $500,000. The current standard deduction for couples filing jointly is $27,700.
The nonpartisan Tax Foundation found that the vast majority of the benefits of doubling the cap would go to couples who earn more than $200,000, and between a third and half of them would see a tax cut, The Washington Post reported. A different nonpartisan estimate by the Penn Wharton Budget Model at the University of Pennsylvania found that the legislation would cost $12 billion in lost federal tax revenue.