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Wednesday, March 31, 2010

$5,000 Tax Credit for Businesses for Each Net Job Created?

Since it's truly that time of year now, let's not forget some positive news regarding taxes.  During President Obama's State of the Union address 2 months ago, he stated that each new job created - on a net basis - will result in a $5,000 tax credit for the hiring company (up to $500,000 per company). The full tax credit is intended for existing companies; start-up companies would qualify for half of the tax credit.

The "net basis" part means that a company which has 10 employees, fires 2 and hires 1, would not qualify. Also, a company could not become eligible for the credit by replacing 1 higher paid employee with 2 less paid employees.

The White House's position is that more than 1 million small businesses could use this tax credit, at a cost of $33 billion.  This proposal needs to be approved by Congress, which did not approve a similar - but lesser - proposal in 2009. The tax credit dollars would be taken from the money left over in the "Troubled Relief Asset Program" enacted in 2008 to bail out banks and other financial institutions.