Almost every other tax cut aimed at individual taxpayers will not benefit a single taxpayer until their taxes are filed in 2010 -- if there is any benefit at all. A new credit called "Making Work Pay Credit" has been added to the maze of credits that already exist and deeply confuse tax preparers. Maybe it is the planned counterbalance to the expansion of welfare in the spending part of the bill. This credit, combined with expansion of the Child Tax Credit, Earned Income Credit and another new higher education tax credit, will not appear until next tax season if these credits appear at all. Regarding the last credit, there are already a myriad of ways people can benefit from spending on higher education, I am not sure how this helps.
Since most people don't qualify for these credits because their incomes are too high, only a small portion of the populace will ever see benefit from these credits. What these will do is encourage more fraudulent tax returns being filed to take advantage of these refundable credits. The only way that most people will get any benefit is because this Obama Stimulus Bill is so inept their incomes may now qualify at the lower levels. At least Californians will be able to get benefit from an offset for their higher sales tax rates because there is a new deduction for sales taxes paid on the purchase of new cars. This falls under the definition that "the Lord giveth and the Lord taketh away." That is if the new deduction does not qualify the taxpayer for the AMT tax, thus eliminating any benefit. It is all so very complicated and unclear.
If you run a business, the tax benefits are even more cosmic. There is an extension of increased depreciation deductions for fixed assets purchased (forklifts, computers). This is a real benefit that I have seen for my clients this year. If you are not expanding your business and you are not buying capital assets, what benefit is this going to do for you? Maybe this will excite a few businesses, but until next year little will be changed in purchasing patterns. Also, there is an expansion of the time to carryback the losses you are incurring in your business to prior years and recoup taxes paid in those years. This will benefit very few businesses. Many will decide tax returns that are past the period that the IRS can audit will not be wise to open up and allow the taxman to look at for three more years.
The list goes on. Other than a tax credit of $7,500 for families buying a plug-in hybrid vehicle, there is little that is clear tax benefits. Of course, the $7,500 will only offset the inflated price for the vehicle because of the cost to make it a plug-in hybrid. So how are they better off?
Combine these nebulous tax reductions with the assured tax increases to occur next year (with the expiration of the Bush tax rate reductions) and you understand why the financial markets are not jumping for joy. As a CPA, I cannot effectively advise my clients what is coming for them in the near future. I can only say watch your wallets; there is more going to the government. So much for us getting a stimulus.