More About Obama’s Proposed ‘Paycheck Bonus’

One of the tax cuts I talked about in ‘Obama’s Proposed Tax Cuts Total $300 Billion’ was the payroll tax cut for low to mid-income workers.

Since this is the tax break that will affect most American’s I wanted to share some more details on what is being called Obama’s paycheck bonus (the official name, right now anyway, is the ‘Make Work Pay Credit’.

The details are still being hammered out, but basically it looks like the tax plan will include a payroll tax break that will mean anywhere from $83 to $166 extra per paycheck for workers, during the first quarter of the year.

Continue Reading More About Obama’s Proposed ‘Paycheck Bonus’

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Obama’s Proposed Tax Cuts Total $300 Billion

In an earlier post, I asked ‘How Will Obama’s Tax Plan Affect Self Employed Americans?’.  Well, more details are emerging as Obama proposes $300 Billion in tax cuts.

Presidential Elect Obama is working with Congress on a tax cut proposal that would make up about 40% of a $775 billion economic stimulus package.

Cuts would be aimed at both individuals and businesses.  At the moment, these are just proposals, but here’s what’s being discussed so far:

• The largest piece of the tax relief package is a payroll tax break of $500 for individuals and $1,000 for couples aimed at low- and moderate-income workers.  I’m wondering if this will also apply to self employed people, but am unsure of the answer so far.
• Relief for businesses include a provision that would allow companies to write off huge losses incurred last year, as well as any losses from 2009, to retroactively reduce tax bills dating back five years.  While businesses would have been able to claim most of the tax write-offs on future tax returns anyway, the proposal accelerates those write-offs to make them available in the current tax season.  This will help companies who are experiencing cash flow problems due to credit being unavailable.
• The Obama plan also proposes to increase the Section 179 deduction up to $250,000 in 2009 and 2010. Currently, the limit is $175,000.  This probably won’t help most small businesses, but those that are expanding or need new equipment will benefit.
• Finally, businesses that create jobs here in the US or avoid future layoffs would receive a tax credit.  Hopefully this will reduce the amount that unemployment is expected to rise in 2009.

While I like the idea of the payroll tax credit, it really needs to apply to self employed people as well.  I’ve heard rumors that self employed people may get to reduce their 1st quarter estimated tax payment, and will confirm or deny as soon as more details become available.

Remember these are just proposals right now.  There will be lots of debate and changes before the final bill is approved.

How Will Obama’s Tax Plan Affect Self Employed Americans?

Self employed taxpayers get the honor of paying the self employment tax on top of their regular income tax.  This can be quite a burden, especially for new business owners.

There has been some indication that there will be tax relief for small business owners in President-Elect Obama’s new tax plan.

So how will the new tax plan affect you, as a self employed individual (or couple)?

According to BarackObama.com, the new tax plan will include:

A $1,000 “Making Work Pay” Tax Credit. For 95 percent of workers and their families—150 million workers overall—the “Making Work Pay” credit will provide a refundable tax cut of $500 for workers or $1,000 for working couples. This credit will benefit over 15 million self employed workers and for 10 million low-income Americans, will completely eliminate their federal income taxes.

Since this is a refundable tax credit, this credit will help reduce your self employment tax in addition to your regular tax.  This is good news, as many of the tax credits available now are non-refundable, and therefore don’t help reduce the self employment tax, which is the largest burden for many sole proprietors.

Continue Reading How Will Obama’s Tax Plan Affect Self Employed Americans?

The Obama Tax Plan Will Cut Taxes for 95 Percent of American Workers

Now that the election is over, our new President-Elect has a lot of work ahead of him.  I don’t envy him his new job, even if he does get to live in the most famous house in America!

One of the biggest challenges will be the economy, specifically taxes.  A lot was said during the election about tax rebates and raising taxes on the middle class, especially after “Joe the Plumber” asked the fateful question that made him famous (well, semi-famous).

There is a lot of fear that Obama will raise taxes for the middle class Americans, but according to BarackObama.com, President-Elect Obama will actually cut taxes for 95 percent of workers and their families, with a tax cut of $500 for working individuals (or $1,000 for working couples).

Here are some key points about the tax plan from BarackObama.com:

Obama’s Comprehensive Tax Policy Plan for America will:

* Cut taxes for 95 percent of workers and their families with a tax cut of $500 for workers or $1,000 for working couples.

* Provide generous tax cuts for low- and middle-income seniors, homeowners, the uninsured, and families sending a child to college or looking to save and accumulate wealth.

* Eliminate capital gains taxes for small businesses, cut corporate taxes for firms that invest and create jobs in the United States, and provide tax credits to reduce the cost of health-care and to reward investments in innovation.

* Dramatically simplify taxes by consolidating existing tax credits, eliminating the need for millions of senior citizens to file tax forms, and enabling as many as 40 million middle-class Americans to do their own taxes in less than five minutes without an accountant.

Continue Reading The Obama Tax Plan Will Cut Taxes for 95 Percent of American Workers