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December 19, 2007 • Part 2 of 2
Tax Updates 2007
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Dear Subscriber,
Here is Part 2 of our Tax Updates 2007 Newsletter.
Please call me, if you have any tax planning questions or concerns to consider before the year end at 323-934-2462.
Regards,
Peter Soh,CPA
peter@adviseinc.com
www.adviseinc.com
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The IRS outlines a few forward-looking tax issues to consider as well
Expiring in 2008:
- Energy-saving improvements to commercial real estate—This special expensing for the cost of energy-saving improvements to commercial building is no longer available after 2007.
- The tax credit for energy-efficient homes—The special credit for builders selling energy-efficient homes expires after 2007.
Changes for 2009 and beyond:
- Solar heating credit—In 2009, the current 30% tax credit for businesses on the cost of solar heating units and fuel cells falls to 10% for those placed in service after 2008.
- Domestic Production Activities Deduction—Beginning in 2010, this deduction increases to 9% of qualifying business net income from domestic production activities. This deduction applies to businesses engaged in construction, engineering or architectural services; film production; or the lease, rental or sale of equipment manufactured in the United States.
- Decreased Section 179 Expense Deduction—The maximum amount decreases to $25,000 in 2011.
- Withholding on government contracts—Beginning in 2011, amounts paid out under government contracts will be subject to a 3% withholding tax. This will affect contracts with the federal government, state governments and any municipality that pays out $100 million or more annually on contracts (interest and payments for real estate are exempt).
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2007 Tax Law Changes
The chart below outlines a number of personal and business tax rate changes.
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Social Security/Medicare |
2007 |
2006 | |
Social Security Taxable Wage Base |
$97,500 |
$94,200 | |
Medicare Taxable Wage Base |
No limit |
No limit |
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Individual Retirement Accounts |
2007 |
2006 | |
Roth IRA |
Lesser of $4,000 or 100% of earned income |
Lesser of $4,000 or 100% of earned income | |
Traditional IRA |
Lesser of $4,000 or 100% of earned income |
Lesser of $4,000 or 100% of earned income | |
Roth and traditional IRA additional annual “catch-up” contributions for account owners age 50 and older | |
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$1,000 |
$1,000 | |
Annual Qualified Plan Limits |
2007 |
2006 | |
Defined contribution plan dollar limit on additions to qualified plans, 403(b) plans and SEP plans | |
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$45,000 |
$44,000 | |
Defined benefit plan limit on benefits |
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Lesser of $180,000 or 100% of average compensation for highest three consecutive years |
Lesser of $175,000 or 100% of average compensation for highest three consecutive years | |
Maximum compensation used to determine contributions | |
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$225,000 |
$220,000 | |
Elective deferral limits for 401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs | |
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Lesser of $15,500 or 100% participant's compensation |
Lesser of $15,500 or 100% participant's compensation | |
Additional catch-up contributions (individuals age 50 or older) for 401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs | |
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$5,000 |
$5,000 | |
Elective deferral limits for SIMPLE 401(k) plans and SIMPLE IRA plans | |
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Lesser of $10,500 or 100% participant's compensation |
Lesser of $10,000 or 100% participant's compensation | |
Additional catch-up contributions (individuals age 50 or older) for SIMPLE 401(k) plans and SIMPLE IRA plans | |
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$2,500 |
$2,500 | |
Compensation defining highly compensated employee | |
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$100,000 |
$100,000 | |
Compensation threshold used to determine a key employee in a top-heavy plan | |
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$1 for more than 5% owners; $145,000 for officers; $150,000 for more than 1% owners |
$1 for more than 5% owners; $140,000 for officers; $150,000 for more than 1% owners | |
Compensation triggering Simplified Employee Pension (SEP) contribution requirement | |
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$500 |
$450 | |
Driving Deductions |
2007 |
2006 | |
Business mileage, cents per mile |
48.5 |
44.5 | |
Charitable mileage, cents per mile |
14 |
14 | |
Medical and moving mileage, cents per mile |
20 |
18 | |
Business Equipment |
2007 |
2006 | |
Maximum Section 179 Expense Deduction |
$125,000 |
$108,000 | |
Phase-out for Section 179 |
$500,000 |
$430,000 | |
Qualified Transportation Fringe Benefit Exclusion | |
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2007 |
2006 | |
Commuter highway vehicle and transit pass, per month | |
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$110 |
$105 | |
Qualified parking, per month |
$215 |
$205 | |
Standard Deductions |
2007 |
2006 | |
Married filing jointly or surviving spouse |
$10,700 |
$10,300 | |
Single (and married filing separately) |
$5,350 |
$5,150 | |
Heads of Household |
$7,850 |
$7,550 | |
Itemized Deduction Phase-Out |
2007 |
2006 | |
Married filing separately |
$78,200 |
$75,250 | |
Phase-out for all others |
$156,400 |
$150,500 | |
Personal Exemption |
2007 |
2006 | |
Amount |
$3,400 |
$3,300 | |
Kiddie Tax |
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Net unearned income for an under-age-18 child that is not subject to the “kiddie tax” | |
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$1,700 |
$1,700 | |
Annual exclusion for gifts |
2007 |
2006 | |
Amount you can give to each recipient |
$12,000 |
$12,000 |
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