The Small Business and Work Opportunity Tax Act of 2007, signed into law on May 25, offers tax breaks for you and your business, but also contains less beneficial provisions that may require changes to your tax plan.
Here’s an overview:
Additional Section 179 Deduction. For 2007, you can expense up to $125,000 of business assets, including furniture, equipment and computer software. Under prior law, the maximum Section 179 expense for this year was $112,000. In addition, the special rule for the Gulf Opportunity Zone is now effective through 2008. This rule applies to specific areas affected by Hurricane Katrina and allows an extra Section 179 deduction of as much as $100,000.
Extended Work Opportunity Tax Credit. The credit, scheduled to expire after 2007, has been extended through August 31, 2011 and the definition of several “targeted groups” was expanded. The credit offsets part of your income tax when you employ workers such as veterans or vocational rehabilitation referrals.
Simplified Family Business Filing Requirements. If you wanted your spouse to take an active role in your business but hesitated because you thought you’d have to file a partnership return, now may be the time to act. Starting this year, you can elect to allocate business income on your joint Form 1040 tax return.
Tip: Splitting business income can affect future social security benefits.
Expanded kiddie tax. For 2007, when your under age 18 dependent child receives net unearned income of more than $1,700, the excess is taxed at your rate. Beginning in 2008, the tax will apply to children under age 19 and to students under age 24.
Other provisions affect the FICA tip credit, alternative minimum tax limits on certain credits and S corporation rules.
For more information and a review of your tax and financial plans, please call 661-775-6200.