Small Business and Work Opportunity Act of 2007

President Bush signed the latest tax law, also known as the Small Business Tax Act, on May 25. The new law, as usual, covers a multitude of topics and includes some retroactive effective dates. Several items will affect many of our clients.

Deduction for Business Equipment Purchases

Immediate expensing, also called Section 179 expense, allows businesses to deduct the cost of most furniture, computers, and business machinery in the year of purchase rather than deducting depreciation over several years. The new law increases the maximum annual deduction to $125,000. The new limit applies to 2007 through 2010.

Husband/Wife Business Partners

Another provision removes the requirement that husband-wife business partners must file a partnership tax return. If both spouses materially participate, and if there are no other owners, then the business may report each spouse's share of income on a separate Schedule C of the couple's individual tax return.

"Kiddie Tax"

Investment income of children under age 14 has been taxed at the parents' rate for quite a few years. Beginning in 2006, the tax was expanded to include children under age 18. The new law includes dependent children under age 19 or dependent student under age 24. The new age limits take effect in 2008. For calendar year 2007, the "kiddie tax" covers children who are under age 18 as of 12/31/07.

The delayed effective date creates a planning opportunity for families with children who turn 18 or older during 2007. If you have children in this age group and are planning to sell appreciated assets held in the child's name, call us for a tax planning appointment.

The new law also affects the tip credit, work opportunity tax credit, and Katrina recovery incentives. If you need details of those provisions, call us.

Partner Activities

Lisa taught classes on tax and accounting for business owners at A+ Federal Credit Union and at the Small Business Development Center.

Ann participated in a case study presentation at the Society of Financial Service Professionals and was a recent guest on Brad Wiewel's radio show "Law Talk with Brad."

Debbie completed her term as president of her BNI chapter in March and led a class on minister's taxation issues at the Austin Presbyterian Theological Seminary.

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