Social Security Tax – The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2007 will rise to $97,500 from $94,200 in 2006.
Standard
Mileage Rate
– The standard mileage rate as of January 1, 2007 is 48.5¢
per mile (up 4¢ from 2006).
Increased Standard Deductions – For calendar year 2007, the value of each personal and dependency exemption, available to most taxpayers, will be $3,400, up $100 from 2006. The new standard deduction will be $10,700 for married couples filing a joint return (up $400), $5,350 for singles and married individuals filing separately (up $200) and $7,850 for heads of household (up $300). Tax-bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket will be $63,700, up from $61,300 in 2006.
Health Savings Accounts
– These accounts offer ualified individuals covered by high
deductible health plans tax favored opportunities to save for
medical expenses. Distributions
from an HAS for ualified medical expenses are tax free, and
unused funds may be carried forward from year to year.
Section
179
– Consider using Section 179 expenses deduction for new
business euipment. For 2007, the allowance is $108,000, with an
increased phase out threshold of $430,000.
Heavy vehicles, including many SUV’s and trucks that
weigh between 6,000 lbs. and 14,000 lbs., can deduct no more than
$25,000.
Manufacturing Deduction
(Section 199)
– This manufacturing deduction phased in during 2005. In 2006, domestic manufacturers
can deduct 3% of the lesser of
their income from ualified production activities or their
taxable income. The
allowable deduction jumps to 6% for 2007 through 2009, and will
be 9% in 2010. ualified
activities include in construction, engineering, architectural,
and agricultural activities.
Your business doesn’t have to be incorporated to take
advantage of it.
W-2
Reminders
–Health insurance premiums paid to more than 2% S-Corp
shareholders must be included on W-2’s.
Also, the unreimbursed portion of personal use of
company-provided automobile for owner, officer, or employee of
the company should be added to their W-2.
Our website contains the Annual Lease Value Table or call
our office for a worksheet to help you compute the auto fringe
benefits and related withholding taxes.
Cost Segregation
–
Consider a cost segregation study to maximize your depreciation
deduction. You can
accelerate depreciation by properly identifying and pricing
nonstructural items and land improvements separately from your
building. These
items have much shorter depreciable lives than the assigned
39-year life for nonresidential real property.
Landscaping, site fencing, and parking lots are some
examples of assets that may need proper classification.
401(k) Contributions – The 401(k) elective deferral limit is $15,000 for 2006 and $15,500 for 2007. For taxpayers age 50 or over, the catch-up elective deferral is $15,000.
Small
Employer Pension Plan Startup Cost Credit – Certain small business employers that did
not have a pension plan for the preceding three years may claim a
nonrefundable income tax credit for expenses of establishing and
administering a new retirement plan for employees.
The credit applies to 50% of the first $1,000 in ualified
administrative and retirement-education expenses of the first
three plan years.
Charitable Contributions – Effective with the Pension Protection Act of 2006, all cash donations must have supporting documentation. In addition, it reuires clothing contributions to be in at least "good condition." Taxpayers 70 1/2 or older are allowed to give up to $100,000 each year (through 2007) to the charity of their choice directly from an IRA provided that distribution would not have normally been taxable.
Ohio Unemployment Tax – For calendar year 2007, there has been a change in the Ohio unemployment tax. This change includes a $500 increase in the taxable wage base which has been the same since 1995. The mutualized tax of 0.1% will remain in effect for 2007.
Important New Rental Property Law – On September 28th, the new law (Sub. HB294) took effect. This law is an attempt at cleaning up abandoned and vandalized properties and it requires rental property owners to supply certain information to their county auditors. This information includes: street address & parcel number of the residential rental property, name, address & phone number of the owner, and contact information of the property representative if other than the owner.