Courtesy of NAEA – The National Association of Enrolled Agents
Small Business Tax Breaks to Be Sent to President (Again)
Congress this week approved a package of small business tax breaks and an increase in the minimum wage; both were tagged onto H.R. 2206, a bill funding the Iraq war through September 30, 2007. President Bush vetoed a similar bill (passed in late April) that included requirements to end the war next year. The president signed the most recent version, which does not include such language. The key tax provisions in the bill include:
- A 3 ½ year extension of the Work Opportunity Tax Credit;
- An increase in §179 expensing limit to $125,000 and phase-out to $500,000 through 2010 (E@lert reminds EAs that some states have decoupled their §179 limits, so be careful!);
- An extension of GO Zone low income housing enhanced credit treatment through 2010;
- A provision allowing an unincorporated business owned by a married couple to file as a sole proprietorship;
- The elimination of treatment of capital gains as passive investment income for S corps (among many S corp provisions);
- An expansion of the “kiddie tax” to 18 year-olds (and 23 year-olds who are full-time students) whose earned income does not exceed one-half of their unearned income.
- Proposal Would Consolidate Education Breaks
House Ways and Means members Rahm Emanuel (D-IL) and Dave Camp (R-MI) have introduced H.R. 2458, the Universal Higher Education and Lifetime Learning Act of 2007, which would consolidate the three existing tax breaks for higher education expenses into a single credit.
The bill would replace the Hope Scholarship and Lifetime Learning credits and the above-the-line tuition and fees deduction with a credit for 50 percent of the first $3,000 of education expenses and 30 percent of the next $5,000 (totaling up to $3,000 for those who spend $8,000 or more in a year). The credit would be available to single filers with incomes up to $80,000 ($160,000 for joint filers).
A similar bill, S. 851, introduced by Senator Chuck Schumer (D-NY), is expected to be taken up by the Senate Finance Committee after the week-long Memorial Day congressional recess.
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- H.R. 2206 :: Small Business Tax Breaks & Increase in Minimum Wage
- NAEA :: National Association of Enrolled Agents
- IRS Notice 2006-21 :: GO Zone Resident Population Estimates