Most of it is political posturing for 2024. Take President Biden’s tax-the-rich ideas, which he touted in his State of the Union address. He wants to raise the excise tax on stock buybacks from 1 percent to 4 percent and hit billionaires with extra taxes. They’re going nowhere. But look for them to pop up again in campaign speeches if Biden opts to run for a second term.
The same can be said about some tax plans backed by House Republicans. Among them: Making permanent the changes in the 2017 tax reform law, many of which are slated to end after 2025. Politicians will eventually act on this, but not until 2025, when they’ll be forced to compromise on which changes to extend.
Another thing that won’t happen in this Congress: A SALT write-off easing, despite members on both sides of the aisle from high-tax states, like New York and California, clamoring for relief from the $10,000 limitation on deducting state and local taxes on Schedule A of the 1040. These members are now starting to focus on the future. Specifically, they don’t want the $10,000 cap extended past its 2025 expiration date.
Despite all this, some changes are possible this year or next. Perhaps a combination of business tax breaks and a bigger child tax credit. Businesses want to see 100 percent bonus depreciation and full R&D expensing restored, while Democrats are again pushing for an expanded child credit. Whether the parties can reach a deal depends on how much each side will compromise. For example, some GOPers might back a higher child credit tied to a work-requirement component.
Relaxing the Form 1099-K reporting requirements has bipartisan support. In 2021, Congress enacted a law requiring third-party settlement networks to send 1099-Ks to payees who are paid over $600 a year in goods or services. It was slated to begin for 1099-Ks for 2022, but the IRS delayed the change for one year, so that the new rules now kick in for 2023 1099-K forms to be sent out in 2024.
Congress may also have to step in to fix a technical glitch in the SECURE 2.0 Act of 2022 if the Treasury Department can’t resolve the error through public guidance. Retirement professionals have pointed out that drafters of the legislation inadvertently eliminated 401(k) catch-up contributions for older workers in their entirety after 2023. Any correction would, of course, have overwhelming bipartisan support.
(Joy Taylor is editor of The Kiplinger Tax Letter. For more on this and similar money topics, visit Kiplinger.com.)
