PRINT
EMAIL
COMMENT
DEL.ICIO.US
DIGG
OUR PREMIUM CONTENT
The Kiplinger Agriculture Letter
The Kiplinger California Letter
Kiplinger's Biofuels Market Alert
Kiplinger's Retirement Report
SUBSCRIBER HELP
CURRENT LETTER
U.S. Agriculture
Feeding the Economy
PREVIOUS ISSUES
Small businesses are closer to getting a bunch of new tax breaks from Congress. Lawmakers recently put the finishing touches on a $4.8-billion package of tax easings designed to offset the effects on business of a $2.10-an-hour increase in the minimum wage that is also on the way to passage.
But political wrangling is delaying enactment. The tax relief and the minimum wage increase were part of a bigger supplemental spending bill that President Bush vetoed May 1, in large part because it set a deadline for U.S. troop withdrawals from Iraq. Congressional leaders will soon start hammering out a new Iraq proposal that Bush can accept and pass the supplemental spending bill again in the next several weeks. Indications are that the tax breaks will stay in that package because Bush has said he would oppose them as a stand-alone bill.
So probably by summer, businesses will be able to take advantage of the following provisions in the tax package:
- An increase in the current $112,000 limit on first-year expensing for new equipment to $125,000. The limit will be indexed for inflation after this year.
- An extension of the work opportunity credit through Aug. 31, 2011, and coverage for more members of disadvantaged groups. Also, employers will be allowed to apply the credit against the alternative minimum tax. Under current law, the credit is scheduled to expire at the end of this year.
- Continuation of a tax break for restaurants and bars that was endangered by the upcoming minimum wage increase. Under the legislation, the credit they get for employment taxes paid on workers' tips above the minimum wage will continue to apply to wages over the current $5.15-an-hour minimum, even after the higher $7.25 rate becomes effective in two years.
- Looser rules on S corporations so that gains on the sales of securities won't be considered passive income. The legislation also provides tax relief for banks that are S firms.
The revenue raisers in the tax package include a bit of bad news for individuals: The legislation bars dependents over the age of 18 from using the special 5% rate on capital gains, retroactive to Jan. 1, 2007. Instead, the 15% rate will apply to any gain. This throws a monkey wrench into the tax plans of families who may have expected to reduce their tax bills by funneling assets they want to sell through their children. Lawmakers are particularly keen to tighten up now because the 5% rate drops to 0% for 2008, 2009 and 2010.
For weekly updates on topics to improve your business decisionmaking, click here.
POSTED BY: Joan Pryde (May 04, 2007 06:54 AM)
Hello, I'm Joan Pryde, the author of the article, and I'm interested in finding out from small business owners how much of a burden the increase in the minimum wage increase will be for them. I hear conflicting things...some say it will be very burdensome and others say the upcoming $7.25-an-hour federal rate is merely catching up with what most employers are already doing. Which is correct?
POSTED BY: E Robbins (May 04, 2007 04:17 PM)
All my employees in Florida and NJ already make more than minimum wage - which they need to do in order to make a decent living.
The tax breaks are totally unnecessary and just add to the deficit and the Nat'l. Debt.
Just more political posturing by Congress, thanks to the President's leadership in making increased taxes taboo.
What services does the country need? And how are we going to pay for them? Borrowing more and more money from the Chinese and others is not the way.
E-Mail Article
Print Article
Reprint Article
|
|
|
|
|
|
|
|
