June 2007

by Ben Lawler, CPA

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New tax law signed in May. Will it affect you?

President Bush signed the Small Business and Work Opportunity Tax Act on May 25, 2007. This law is part of a larger bill that provides funds for the troops and increases the federal minimum wage over a two-year period to $7.25.

To help offset the cost of the increased minimum wage, the law provides a number of tax breaks for businesses.

Although, some individual taxpayers may find their tax bills are increased by the revenue raising portions of the law.

Here's a brief overview of the tax changes:

• The limit for the Section 179 election to expense
    business equipment purchases is immediately increased
    from $112,000 to $125,000, with the phase-out amount
    increased from $450,000 to $500,000.
  
  
• Married couples who jointly operate an unincorporated
    business and who file a joint return may elect not to
    report their income as a partnership. Instead of
    filing a partnership return, they can each report
    their income on Schedule C of Form 1040.
  
  
• The age limit for the "kiddie tax," the taxing of a
    child's unearned income above a certain amount at the
    parents' higher rate, is increased from age 18 to 19.
    For full-time students, the kiddie tax will apply
    until age 24. This change is effective for tax years
    beginning after May 25, 2007 - which for most taxpayers
    means the change will become effective in 2008.

Among other provisions in the law are tax incentives to help taxpayers recovering from Hurricane Katrina and some S corporation changes.

If you have any questions give us a call.

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Written by Ben Lawler, CPA

CEO & President of ProActive Advisors, Inc.