Just when you thought you finally had your tax situation figured out, it's on the brink of changing again. But will the proposals being considered by Congress help you or hurt you? That depends on your circumstances--and on who prevails on Capitol Hill. A good many of the tax measures before Congress are part of President Clinton's 1999 budget package, but Republican lawmakers have a tax agenda as well, with a major focus on broad income tax cuts. Small-business owners stand to benefit from several of the proposals, but the Clinton administration's efforts to crack down on estate-planning strategies could mean higher taxes for family firms.
The administration wants to use the tax code to accomplish some specific policy objectives. For example, it would provide small-business owners with tax incentives for setting up and expanding employees' pension and retirement plans, and businesses would receive tax benefits for improving energy conservation.
The budget package also includes measures to extend several business tax credits and deductions that are due to expire. These include an employer education assistance deduction, a work opportunity credit, a welfare to work credit, and a research and experimentation credit. These "extenders" help focus attention on other tax proposals, says Thomas P. Ochsenschlager, a tax partner in the Washington, DC, office of accounting firm Grant Thornton. "Congress ends up extending these credits, and that generates congressional interest in a tax bill," he explains.
Graduate education would be given a boost under Clinton's extension of the employer educational assistance deduction. He proposes allowing educational grants of up to $5,250 per year for undergraduate courses to be considered a deductible expense for employers but not counted as income for workers through May 31, 2001. Clinton also wants to allow employees taking graduate-level courses to receive the same tax benefit from July 1, 1998, through May 31, 2001.