![]() The TCJA limited businesses to only deducting 50 percent of business meals (and eliminated the deduction for entertainment expenses). There are a few COVID relief policies that are expiring at the end of this year, such as the full deductibility of business meals at restaurants. Numerous other COVID-era tax policies expired in 2021, including expansions of the Earned Income Tax Credit and Child and Dependent Care Tax Credit, a new above-the-line charitable deduction, as well as modified limits to the established itemized deduction for charitable contributions. The expanded CTC expired this year, but some policymakers are pushing to bring this expanded credit back as part of a lame-duck tax extenders package. The last version of the Build Back Better package would have extended the increase by one year and made full refundability permanent. But ARPA raised the CTC’s value to $3,000 (and $3,600 for children under six), while making it fully refundable. Today (and before ARPA), the CTC reaches a maximum value of $2,000 per child, with only $1,400 of it being refundable. One of the most significant policies in ARPA was the expansion of the Child Tax Credit (CTC). CARES and American Rescue Plan Issues Child Tax Credit ![]() Limit on Business Interest Expenses Based on EBITĪnother major TCJA change that took effect at the beginning of this year, the law originally limited business deductions for interest expenses to 30 percent of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and now limits those deductions to 30 percent of Earnings Before Interest and Taxes (EBIT), effectively a tighter limit. In late 2021, there was bipartisan interest in preventing this policy from going into effect, but policymakers included delaying R&D amortization in the Build Back Better package that ultimately failed to pass, and the policy took effect at the beginning of this year. This effectively penalizes R&D investment in the tax code. Starting in the 2022 tax year, the TCJA requires companies to amortize the cost of R&D investment over five years, rather than deducting those costs immediately. This will fall to 60 percent in 2024, 40 percent in 2025, and effectively phase out completely by 2026. ![]() In 2023, companies will only be able to deduct 80 percent of their investments in short-lived assets immediately, with the remaining 20 percent spread across the asset’s life. Expiring Provisions from the Tax Cuts and Jobs Act 100 Percent Bonus Depreciation for Equipment and Machinery However, more structural issues are on the table, stemming from pieces of major legislation-like the TCJA, the CARES Act of 2020, and the American Rescue Plan (ARPA) of 2021-expiring or phasing out. This summer, many of the smaller policies that used to be ritually extended for an additional year or two were stretched across a decade as a part of the Inflation Reduction Act (IRA). In 2021, there was no tax extenders deal, and numerous provisions expired. At a time of heightened concerns about the economy, high deficits, and inflation, policymakers should prioritize stability and economic growth by making permanent the pro-growth tax provisions in the Tax Cuts and Jobs Act (TCJA) of 2017 and letting temporary provisions related to the pandemic and tax extenders that narrow the tax base expire. At the end of each year, policymakers face a series of expiring tax provisions that are typically extended on a temporary basis, setting up a recurring and almost ritualistic tax extenders season.
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