Feb 18, 2010

Proposed Tax Credit for New Hires in 2010

In an effort to stimulate hiring and increase employment, the Obama administration has proposed a one-year tax credit for businesses that hire new employees in 2010. Under the proposal, any firm that hires a new employee in 2010 would get up to a $5,000 tax credit for each hire. The credit is capped at $500,000 per company. In addition, firms that hire new employees or increase salaries of current employees would be reimbursed for Social Security taxes related to their increased payroll. The Social Security reimbursement would not apply to wages above the $106,800 Social Security maximum to make sure the benefit is tied to -- and encourages the hiring of -- less highly paid workers.

The administration estimates 1 million small businesses will take advantage of the credit, which is expected to cost the government $33 billion. The money would come from savings from the Troubled Asset Relief Program, which officials now think will cost $200 billion less than expected.