Stay updated with the latest changes in U.S. corporate tax laws for 2024. Discover key tax reforms, updates on deductions, credits, and new regulations that impact businesses.
Introduction
Whether it’s a company, small or large, you need to understand how to navigate through corporate tax laws and what has lately changed with U.S. tax laws for 2024. In recent years the U.S. government has enacted many reforms aimed to create a fairer playing field for innovation and ensure that large corporations are paying their fair share of taxes. R&D tax credits and the depreciation rules, alongside ESG reporting, all mean companies need to be in the know to be as efficient as possible.
The most important tax legislation change for 2024 could impact on the profitability of your business; we will take a closer look at one of those.
1. Increased R&D Tax Credit Opportunities
According to the U.S. government, businesses now have more opportunities to earn R&D tax credits when they invest in research and development in 2024, a big booster for those leveraging the power of innovation to grow their business.
What’s New: Companies can now claim more comprehensive R&D credits, including software development and process improvements.
Small businesses can offset payroll taxes with R&D credits, as long as the businesses are under $5 million in revenue previously it wasn’t allowed.
Why It Matters: This is a massively beneficial change for tech startups and product companies investing in new product development. This enables them to recoup some of their expenses for innovation and put the money back into their growth.
2. Changes to Depreciation Rules: Bonus Depreciation Reductions
In 2024, businesses will see bonus depreciation reduced – that is even if you write off 100% of the cost of qualifying property in the first year.
What’s New: The bonus depreciation percentage will drop from 100% to 80% in 2024, and it will continue to decrease until it phases out by 2027.
Why It Matters: Although it is still a good thing, the cut in bonus depreciation is a signal to firms to rethink the capital investment plan. Businesses will have to plan carefully to ensure they maximize deductions and given the changes will make the timing of purchases more significant in terms of tax liabilities.
3. Corporate Minimum Tax Rate
A corporate minimum tax rate will be introduced from 2024 to guarantee that big corporations pay their fair share into federal taxes.
What’s New: Corporations with profits exceeding $1 billion will now be required to pay a minimum tax of 15%, regardless of the deductions and credits they apply.
Why It Matters: The provision aims to plug this hole by tightening up on larger companies that have in the past used questionable tax maneuvers to reduce the tax paid. Although ordinarily unimportant for small companies, larger businesses will need to change their strategies in light of this new tax liability.
4. New Limitation on Interest Deductions
A new limitation on interest deductions beginning in 2024 will apply to companies that rely heavily on debt financing.
What’s New: Interest deductions will be limited to 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA), down from 40% under previous rules.
Why It Matters: For example, this change will affect businesses, for instance those in the real estate or private equity sectors, that typically have high debt levels. Given these industries, for companies in these industries, there is likely to be higher tax liability and, therefore, other financial strategies should be employed to mitigate costs.
How can businesses stay compliant with the new corporate tax laws?
Tax law changes need to be kept abreast of and relying on professional advice and adapt business strategy accordingly stay in compliance and optimize on tax outcomes.
5. Expansion of ESG Reporting Requirements
More central to corporate tax laws are environmental, Social and Governance (ESG) concerns. Starting next year, businesses will have to provide more detailed disclosures on their sustainability efforts.
What’s New: Corporations will be required to disclose specific ESG-related data, including carbon emissions and sustainability initiatives. Failure to meet ESG reporting standards could result in penalties.
Why It Matters: ESG reporting requirements are expanding and that places further regulations to comply with for companies, especially publicly traded companies. The potential for tax credits and a positive brand reputation will benefit companies who are seen as having a strong ESG.
6. Impact of the Inflation Reduction Act (IRA) on Corporate Taxes
The Inflation Reduction Act, signed in 2022, still affects how corporate tax treatment in 2024 will impact businesses investing in renewable energy.
What’s New: The IRA includes tax incentives for businesses that adopt energy-efficient technologies or invest in clean energy projects. The new provisions help manufacturers of clean energy products get access to tax credits.
Why It Matters: This is of great benefit to business wishing to reduce their carbon footprint. Clean energy investments can also result in major tax savings, while enabling leadership to follow their sustainability goals.
7. New Reporting Requirements for Digital Assets
As if cryptocurrency and digital assets were not already complicated enough, the IRS has introduced new reporting requirements for digital asset transactions beginning in 2024.
What’s New: Businesses engaging in cryptocurrency transactions will face stricter reporting requirements, including the need to disclose gains, losses, and detailed transactions on tax filings.
Why It Matters: These new reporting requirements are necessary for businesses that have to deal with digital assets as failure to do so would lead to penalties. It also points to how crucial it is for digital transactions to have accurate record keeping.
Conclusion
2024 U.S. corporate tax changes: What companies need to know. Implemented in the countries of the European Union, from expanded R&D tax credits to new ESG reporting requirements, these reforms offer opportunities and challenges for firms of any size. In order to safeguard your business from being overtaxed or non-compliant, you will want to keep a pulse on changes and work with tax professionals to make sure you stay on track to maximize your tax savings.
At Applied Accountancy, we focus on guiding businesses to find their way through the complicated corporate tax laws. If you are not sure that your company is fully optimizing its tax strategy, understanding how changes in tax legislation will affect you or complying with the complexity of recent reforms, our expert team will be able to help. Do not hesitate to reach out to us today to learn more and gain access to our inventory of tax resources and services.
Applied Expertise: accounting, corporate tax laws, U.S. tax reforms, deductions, credits, R&D tax credits, depreciation rules, ESG reporting, corporate minimum tax, interest deductions, EBITDA, Inflation Reduction Act, clean energy tax incentives, digital assets, cryptocurrency reporting, compliance, tax liabilities, capital investment planning, sustainability initiatives, financial strategy, tax savings, penalties, IRS regulations, innovation, taxation, reporting requirements, financial disclosures, corporate taxes
