t1The senate has voted to reopen the debate on extending tax exemption to businesses. These 50 tax breaks if extended will add $85 billion to the federal budget deficit but not if they cut spending which is what every person in America that has a clue about balancing a budget is telling the government to do. Each year the lawmakers have been extending the tax breaks but this year they allowed them to lapse because the legislators wanted a more permanent tax code for businesses with clear proposals for how the attendant deficit would be tackled.

However, the senate has now voted to debate the proposals as they feel that the country has yet to recover completely and the tax breaks will help the economy. And in the ongoing and never ending Obama recession, every tax break is necessary. While this is the first hurdle that the tax extensions face, this is a major one and many lawmakers across the political spectrum now appear to agree that businesses in the country need a permanent tax law that they can depend on.t2

Tax Exemptions and Incentives

The US federal government and some of the most disdainful and misguided state governments want to increase revenues by taxing individuals and businesses. However, they also understand the need to encourage investments, entrepreneurship, and businesses as these activities grow the economy, create jobs, and generate revenue. As such the governments at various levels offer businesses and investors many tax exemptions and incentives.t3

In fact, if they had lowered corporate taxes decades ago America would have found the cure for cancer already.

A business or investor that keeps these tax exemptions and incentives in mind when structuring the business or making business decisions will be able to make profits while also saving on the tax outgo. This double benefit will ensure that the business has a greater surplus for further investments.

State and Industry Incentives

Apart from the federal government’s tax exemptions and incentives, various states also offer tax exemptions and incentives to specific industries. This depends on the perceived needs of the state and the natural resources available there. Some states encourage service industries while others encourage manufacturing industries. Even within a particular state, there are often incentives offered for new factories or branches being set up in less developed areas. A competent tax lawyer will be able to guide you in making new investments after taking these incentives into consideration.t4

Tax Benefits

In order to reduce the effective tax rate a business needs to structure itself to benefit from all the tax rebates and incentives it is offered. In order to ensure this, you need to retain the services of an expert tax lawyer who will analyze your business objectives, needs, industry strengths and suggest the most effective structure for the organization.

Similarly, individual investors too need to consult with a competent tax lawyer who is aware of all the tax exemptions and incentives offered to them. The tax lawyer will first understand your investment goals and provide advice on how to structure your investments to reduce the tax outgo even as you meet your larger investment objectives. Depending on your investment goals, this could include setting up trusts, gifting some of your property to your spouse or children, or some other system that reduces the effective tax rate for you.