business tax cutsThree business tax cuts could be renewed in time for the filing of the 2023 tax as Democratic lawmakers negotiate for the extension and increase of the Child Tax Credit. Approved under the American Rescue Plan Act of 2021, reports have it that lawmakers coming from both Republican and Democratic parties are nearing a deal amounting to $70 billion up to $80 billion that will see to the increase and extension of the child tax credits in exchange for the revival of the following Trump-era business tax breaks:

Same Tax-Year Full Recognition of Research and Development Costs

filing of Annual Income TaxFull deduction of domestic research and development (R&D) costs in the same tax year instead of amortizing or spreading the amount invested, usually over a period of 5 years. Deducting the R&D costs incurred in full, from the gross income of the tax year will greatly reduce the taxable Net Income on which the annual tax due will be based.

Restoration of Certain Expenses as Income Tax Deductions

Restoration of the Interest expenses incurred during the year as a Net Income deduction, which stands opposed to the EBITDA tax policy. EBITDA stands for Earnings Before Tax, Interests, Depreciation and Amortization, a tax policy that in effect denotes a higher taxable income. Mainly because the said expenses will not take effect as single net income deductions.

Restoration of the Depreciation and Amortization costs as expenses during the year to reduce the taxable Net Income. This business tax break is also the opposite of the EBITDA tax policy that calculates annual tax due on earnings before deducting interests, income tax, depreciation and amortizations.

The federal Child Tax Credits (CTC) on the other hand refers to the tax refunds that parents with dependent children can claim to reduce the current tax due for payment. The proposed extension will increase the current refundable credit limit to $1,600 cap. It should be clear that the pandemic-era monthly cash payments sent to families as financial assistance are not part of the ongoing tax credit negotiation deals.