Tax and Financial Articles

June 2007 Tax Alert

TAX ALERT
NEW LAW INCLUDES BUSINESS/PERSONAL TAX CHANGES

A portion of a supplemental spending and minimum wage bill recently signed into law included several tax provisions that may have an impact on you and your business. The Small Business and Work Opportunity Tax Act of 2007 contains $4.8 billion in small
business tax breaks -but also includes $4.4 billion in revenue raisers.

We have briefly summarized below just two of the changes that may affect you

Section 179 Expensing Deduction .The new law increases both the maximum annual expensing amount and the threshold phaseout amount. For tax years beginning in 2007, the practical impact of these changes is to increase the annual expensing limitation from $112,000 to $125,000 and to increase the phaseout amount from $450,000 to $500,000.

Kiddie Tax. In general, the revenue code imposes taxes on a young child’s unearned income in excess of $1,700 at the child’s parents’ tax rate. A 2006 tax law increased the age at which the kiddie tax applies, from under age 14 to under age 18. Now, the new law modifies that change so that the kiddie tax applies generally to children under 19 years old, effective in tax year 2008. More importantly for many taxpayers, the law will also apply the kiddie tax if the child:

• Is over age 18 (but under age 24) and
• Is a full-time student and
• Has earned income that does not exceed one half of the student’s total support.

Summary

With the business tax changes and the new kiddie tax rules, your tax planning may need a tune-up. Why not contact us today to find out more about how the new tax law may affect your situation.