U.S. Tax Credits

Are you running or starting a U.S. business that can benefit from American tax savings? Using strategies for U.S. tax credits and deductions can significantly enhance the value of your business!

Noteworthy U.S. Tax Incentives

You may be aware of the generous energy-related tax credits and other benefits in the U.S., including credits that can be sold for cash. These were enacted in 2022 and implemented according to government regulations in 2023-24.

Additionally, Congress is considering reinstating previous business tax benefits, such as the 100% bonus depreciation—essentially a full deduction of many business asset costs for U.S. tax purposes—and generous tax breaks for R&D expenses.

The U.S. House of Representatives has recently passed these and other tax incentives, but the U.S. Senate has yet to approve them, so they have not been sent to the President for final enactment. If passed, they could be retroactive to early 2024 or even earlier. Stay tuned for updates!

What About Pending Global Tax Reforms?

In recent years, many countries have been contemplating major changes to international tax principles, including imposing a 15% minimum tax rate on the income of international taxpayers in each country where they operate.

Even if international taxpayers avoid the minimum tax, this rate can be partially enforced by allowing other countries to levy a supplemental tax to cover the minimum tax shortfall. This means that U.S. (or other) businesses using tax credits and deductions to reduce their effective tax rate below the minimum could face taxation on their global income by other countries, negating the economic benefits of U.S. tax savings. This conflicts with the U.S.’s sovereign constitutional power to tax its citizens at any desired rate, including offering tax credits and deductions.

Recently, the U.S. has stated that it cannot join these new principles if their implementation undermines American tax incentives (like those described in the first section). Keep an eye out for further developments on resolving this conflict!