On May 25, President Bush signed federal tax legislation that will affect your business and personal income tax returns this year and in the future. Among other changes, provisions in the new law affect certain credits, deductions, and reporting requirements.
Here's a selected overview.
- The Work Opportunity Tax Credit is extended to August 31, 2011, and more workers are now included in "targeted groups." By hiring employees such as qualified veterans and long-term family assistance recipients, you may be eligible for a credit that directly offsets a portion of your taxes.
- The FICA Tip Credit will not be reduced, even though the legislation increases the minimum wage. If you pay FICA tax on certain tips received by your employees, you'll continue to calculate your credit based on the current minimum wage.
- The Section 179 expensing limit is increased to $125,000 for 2007. In addition, you can now purchase up to $500,000 of business assets before the amount you expense is reduced.
- Sole proprietorship reporting requirements have been eased for spouses who operate a business together. Beginning this year, you can elect to split the income on your joint return instead of filing a partnership tax return.
- The "kiddie tax" rules will apply to older children. Effective for 2008, the rules include children under age 19 and full-time students under age 24.
The new law also makes changes to S corporation rules and extends tax incentives for certain Gulf Opportunity Zones. Please give us a call to discuss the details of provisions that could affect you.
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