While many hurdles still stand in the way of it being passed, the U.S. Congress reached a bipartisan deal to pass a $78 billion bipartisan tax deal on Jan. 16 after months of negotiations. 

Families with small kids, those who build low-income housing and small businesses are the ones singled out for tax breaks in the package negotiated by House Ways and Means Committee Chair Jason Smith (R-Mo.) and Senate Finance Chair Ron Wyden (D-Ore.).

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Some of the biggest changes include bringing back the expanded child tax credit that was part of the American Rescue Plan Act but dropped down to its earlier limit in 2021 as the country emerged from the pandemic.

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While still far from the earlier $3,600 limit, the proposed change would allow low-income families earning at least $2,500 a year to get a higher credit if they have lower income and more children as well as use income from either the current or prior year (this is meant to ensure that a sudden change of circumstances does not disqualify already low-income families from the credit) to receive up to $1,800 per child for 2023 and up to $2,000 by 2025.

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For those who run their own business, the proposed change would allow what one spends on domestic research and development to be fully expensed (there are some exceptions now), increases the subcontractor reporting threshold from $600 and raises the amount in capital expenditures that small businesses can write off from $1 million to $1.29 million.

Lawmaker promises that new tax cuts will ‘provide greater tax relief, strengthen Main Street’

Many of these business breaks bring back what was scrapped in 2017 under former President Donald Trump as a way to add money to the coffers through tax cuts. But those who relied on the Employee Retention Tax Credit are out of luck since scrapping it is what will finance much of the nearly $80 million in new credits.

“American families will benefit from this bipartisan agreement that provides greater tax relief, strengthens Main Street businesses, boosts our competitiveness with China, and creates jobs,” Smith said in a statement on the tax deal.

To stimulate developers to build affordable housing, the package also proposes raising the Low-Income Housing Tax Credit. The package was a negotiation between Democratic-led efforts to increase the credit for struggling families and Republicans’ focus on helping stimulate business. 

But while these changes can provide some much-needed benefits to both, much still needs to go right before it is signed into law. The proposal needs to be formerly written as legislation and be approved by both the House and the Senate, which are led by the respective Republicans and Democrats and whose infighting over budget issues has brought the country close to a government shutdown twice in recent months.

But Wyden, who led the efforts to craft the proposal, told news outlets that he hopes it will pass quickly so that those who need it most can benefit for the upcoming tax season.

“I’m going to pull out all the stops to get that done,” he promised.