The results of the midterm election will have a significant impact on how Americans cope and recover from this time of economic constraint. One thing is certain — taxes will be the highlight of any bipartisan legislation moving forward. What does this mean for you as a taxpayer? Potential increases or decreases in tax refunds — depending on who wins the Senate. Below are several anticipated items on the horizon over the next two years.

Republicans plan to extend tax provisions for businesses

If Republicans take both the House and Senate or just the Senate — business tax provisions will be a priority. The Research and Experimental (R&E) deduction and extension of expiring tax provisions in the Tax Cuts and Jobs Act (TCJA) will be a major priority.

Democrats to make permanent Child Tax Credit expansion

In 2021, Democrats expanded the Child Tax Credit (“CTC”) and Child Dependent Care Credit (“CDCC”) for taxpayers, but these increases expired in 2022. In response, some states have established their own CTC, but Democrats hope to permanently implement this expansion by winning the Senate or negotiating bipartisan legislation.

Deadlock or Compromise?

The first item on the agenda post mid-term elections will be funding the government for fiscal year 2023, as the last spending bill runs out on December 16, 2022. What can we expect? A last-minute push for a year-end tax package consisting of a compromise between Democrats and Republicans on the CTC for R&D deduction, both providing immediate relief for taxpayers at tax time.

Next up will be one of two uniquely positioned bipartisan retirement account bills. The EARN Act and the RISE AND SHINE Act, both consisting of major changes to retirement accounts, including a $1,000 penalty free withdrawal to create an emergency savings account with a max contribution of $2,500.

IRS Funding slashed?

Over the summer you may have heard that the IRS received $80 billion in funding and that Republicans plan to repeal that funding after the midterm elections. This is unlikely to happen as President Biden holds veto power over any bills; however, Republicans may still attempt to block the IRS’ annual appropriation funding. An opportunity of bipartisan support could lead to the development of a new IRS tax return free file system — taxpayers are fed up of prolonged processing times for their tax refunds and a free IRS tax preparation program could be the answer.

Hail Mary

This is not a religious or football reference, but a tax wish list, if it exists. With the 2024 elections looming and taxpayers feeling the pocket pinch due to inflation, here’s one item that many taxpayers can benefit from at tax time — repealing the State and Local Tax (SALT) cap limitation. Due to the housing boom over the last two years, taxpayers in every state can expect an increased tax refund if this limitation was repealed.

What’s Next

The choice is yours. Your vote not only determines who controls the Senate or the House but your tax refund as well. Vote with your taxes in mind.

This content is provided for informational purposes only and should not be construed as tax, legal, financial, or other professional advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need specific advice.