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.

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Year End Tax Tips

It’s hard to believe we’re almost at the end of the year already.  As I write this, there are only a few weeks left in 2008.

Most people probably aren’t thinking about taxes yet, but the time to do tax planning is before the year ends.  Once December 31 has passed, there’s very little you can do to help reduce your 2008 taxes.

The first step in tax planning is to determine where you are for the year.  Pull out last year’s tax return for a reference.  You also need your most current profit and loss statement, so if your books aren’t up to date, now’s the time to get caught up.

Compare your income and expenses to last year’s tax return.  Is your income up?  Do you have the same amount of deductions as last year?  If your income is up, or if your expenses were down, you may owe more taxes than you did last year.

Continue Reading Year End Tax Tips