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On May 25, 2007, President Bush signed the Small Business and Work Opportunity Tax Act of 2007 into law. The tax act targets nearly $5 billion in tax incentives, principally aimed at small businesses.
Some of the important incentive provisions include:
- Increase in IRC Sec 179 expensing for fixed asset additions
- Annual base amount increased to $125,000 (for 2007)
- Annual investment limitation amount increased from $450,000 to $500,000 (for 2007)
- Work Opportunity Tax Credit
- Benefit extended through August 31, 2011
- Scope expanded to include a broader group of "economically challenged" populations
- Credit may offset AMT liability for individuals
- For certain targeted groups, annual wage threshold increased to $12,000
- FICA Tip Credit
- Minimum wage level (for purpose of calculating the credit) has been frozen at the old rate of $5.15 per hour.
- Prevents erosion of the tip credit due to scheduled increases in federal minimum wage to $7.25 per hour.
- Credit may offset AMT liability for individuals
- Family Business Tax Simplification
- Effective Jan. 1, 2007 for calendar year taxpayers
- Applicable to married couples owning a joint interest in a partnership
- May now elect out of partnership reporting
- Income/loss items now reported on Schedule C as sole proprietors
- Allows both spouses to get credit for paying Social Security and Medicare taxes
Please note, while the above items are available for tax year 2007, some of the provisions have different beginning effective dates.
Due to the timing of enactment, taxpayers have an opportunity to plan their 2007 business decisions and transactions to maximize the benefits afforded by the new tax law.
To find out more about these and other provisions of the Small Business and Work Opportunity Tax Act that may be applicable to you, please contact your Rea & Associates representative.
-By Chris Axene, CPA (Senior tax manager, Dublin office)
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