More Tax Law Changes on the Horizon? - Obama Unveils Fiscal 2011 Plan

On February 1, President Barak Obama shared his plans with Congress on federal government budget proposals for the 2011 fiscal year. As a part of the $3.8 trillion budget proposal, President Obama’s agenda will focus on creating jobs and reducing the national deficit. Among the President’s proposals are to further increase taxes on high-earning individuals and families, provide tax credits for creating new jobs and extend various business tax incentives.

Of course, Congress must carefully weigh in on these proposals before we actually see which items become enacted into law. However, taxpayers can almost certainly bet that the legislative landscape will see some broad-sweeping tax changes that will affect the general public. The following are some highlights of the White House’s tax proposals:

Job and Wage Incentives for Qualified Small Businesses

  • Jobs Creation Tax Credits – $5,000 tax credit for every net new employee hired in 2010, capped at $500,000 ($250,000 for start-ups).
  • Social Security Taxes – Reimbursement of Social Security taxes for real increases in payrolls for existing employees up to the $106,800 wage limit.

Business Incentives

  • Bonus Depreciation – Extension of additional 50% first-year depreciation through December 31, 2010.
  • Sec. 179 Expensing – Extension of enhanced Sec. 179 expense election through December 31, 2010.
  • Research Tax Credit – Credit would become permanent.
  • Qualified Small Business Stock – 100% exclusion from capital gains tax realized on sale of stock.
  • Last-In, First-Out Method (LIFO) – Gradual phase-out in repealing the LIFO method of accounting.

Individual Taxes and Incentives

  • High-Earning Individuals and Families – Increasing marginal tax rates on incomes greater than $200,000 and $250,000, respectively.
  • Capital Gains/Dividends – Increasing the tax rate to 20% for most individuals.
  • Refundable Saver’s Credit – 50% refundable credit on first $500 ($1,000 for MFJ) of qualified retirement savings for lower- and middle-income taxpayers.
  • Employee IRAs – Mandatory requirement for employers to set up IRA accounts if no retirement plan is offered.

 

Schneider Downs provides accounting, tax , wealth management and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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