Small Business and Work Opportunity Tax Act

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.
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.

* The Work Opportunity Tax Credit for hiring certain
  disadvantaged workers was set to expire at the end of
  2007. The new law extends the credit through August 31,
  2011, and broadens the credit to include more veteran
  groups.

* The FICA tip credit will continue to be based on the
  old $5.15 minimum wage even though the minimum wage
  increases to $7.25 an hour.

* 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.