We live in very interesting times- both from an economic and political perspective. I generally try to avoid the politics topic as it fires people up one way or another. However, I don't think that the impact of politics on taxes, especially in the current environment, can be ignored. This year will be especially dynamic as it is an election year with a lot of dissatisfaction with the current legislators. There are several different ways that this will come into play. For one, we have many of the Bush tax cuts that will be expiring at the end of 2010. Although these tax cuts are more at the individual level than at the business level, they still affect business owners. There has been talk of extending the tax cuts for all individuals or allowing the credits for wealthier individuals (typically Adjusted Gross Income > $250,000) to expire.
It appears that the government is also beginning to realize that the economy will not improve for the long-term until more jobs are generated and stability has been added back to the American economy. One of the quickest ways to generate jobs is to provide incentives for businesses to hire individuals. We have had that this past year via the H.I.R.E. act and I would not be surprised if they extended it into 2011 or implemented something similar. I also believe that the government has realized that the economy will not stabilize until the banks start lending again. They will probably start looking at ways to encourage banks to start lending to businesses again. Finally, the government may offer additional tax incentives for businesses to purchase new business equipment.
What is the takeaway from this? Legislative changes will be coming that will affect tax credits for both businesses and individuals. I do everything I can to stay on top of these changes and to keep my clients informed as to how, once implemented, you can utilize new tax laws to your advantage. Expect updates later in the fall to provide more detailed information on tax legislation that actually gets implemented.