Expect some changes when you file your 2007 tax return!
Here are a few highlights from the Small Business and Work
Opportunity Act of 2007.
Do you own real estate?
At the very end of 2007, Congress passed a bill with
several tax law changes impacting real estate. Qualified
Joint Ventures by Married Taxpayers If a husband and wife
who file a joint return are the only members of a qualified
joint venture, they can elect not to be treated as a
partnership for Federal tax purposes. Applies to tax years
beginning after December 31, 2006.
§179 Deductions: This great deduction has been
extended through 2010. Taxpayers with $500,000 or less in
assets placed in service on or after January 1, 2007 can
elect to expense immediately up to $125,000.
GO ZONE §179 Deductions: For 2007 Taxpayers with
$1,050,000 or less in assets placed in service on or after
January 1, 2007 can elect to expense immediately up to
$212,000.
FICA Tip Credit: The FICA tip credit will continue to be
based on the old minimum wage of $5.15 even though the
minimum wage is scheduled to increase to $7.25 over the
next two years. Applies to tips received for services
performed after December 31, 2006.
Work Opportunity Tax Credit: The Work Opportunity Tax
Credit is extended an additional 44 months through August
31, 2011. (Note that with respect to an employer that hires
a targeted individual on August 31, 2011, the credit will
be available for wages paid through August 30, 2012.) The
targeted veterans group is expanded to include veterans
with service-connected disabilities, and doubles the
maximum credit for hiring those veterans. The "high-risk
youth" targeted group has been replaced with a much broader
group that includes older individuals (up through age 39),
and individuals who reside in certain rural counties. The
rehabilitation referrals group has been expanded to include
individuals referred through a Social Security
Administration Ticket to Work and Self-Sufficiency Program.
Applies to individuals who begin work for the employer
after May 25, 2007.
Waiver of AMT Limits on Work Opportunity and FICA Tip
Credits: The work opportunity tax credit and the credit for
portion of FICA taxes paid with respect to employee cash
tips may offset alternative minimum tax liability. The
waiver of AMT limits apply to credits determined in tax
years beginning after December 31, 2006, and to carrrybacks
of such credits. Effective for tax years beginning after
December 31, 2006, and to carrybacks of such credits.
Sale of Stock in a Qualified Subchapter S Subsidiary: An S
corporation's sale of a QSub's stock is treated as a sale
of an undivided interest in the QSub's assets followed by a
deemed creation of the subsidiary in a §351
transaction. These new rules are not intended to affect
current law treatment of transfers of QSub stock in
otherwise nontaxable transactions. For example, certain pro
rata distributions of QSub stock by a parent S corporation
to its shareholders can qualify for tax free treatment if
the requirements of §355 and §368(a)(1)(D).
Applies to tax years beginning after December 31, 2006.
What changes are in store for your 2008 taxes?
Kiddie Tax: The kiddie tax is expanded to apply to any
child who is 18 years old or is a full time student over
the age of 18, but under age 24. However, the kiddie tax
will not apply to such individuals if their earned income
exceeds half of their support for the year. Does not apply
until 2008.
Passive Investment Income of S Corporations: S corporation
capital gain from the sale or exchange of stock or
securities is no longer characterized as passive investment
income. Gross receipts from more regular income streams
(those derived from rents, royalties, dividends, interest
and annuities) remain subject to the passive investment
income limitations. Becomes effective for tax years
beginning after May 25, 2007.
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Tom Wheelwright is not only the founder and CEO of
Provision, but he is the creative force behind Provision
Wealth Strategists. In addition to his management
responsibilities, Tom likes to coach clients on wealth,
business, and tax strategies. Along with his frequent
seminars on these strategies, Tom is an adjunct professor
in the Masters of Tax program at Arizona State University.
For more information, visit
http://www.provisionwealth.com.com .
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