Hispanic Enterprise - October/November 2007 - (Page 43)

newal more appealing to small businesses, since 2003 the tax code has allowed an increased amount of expenses to be claimed as deductions under section 179. CHANGES: • The maximum cost of assets that can be claimed as section 179 deductions has increased from $108,000 to $125,000 for property placed in service in 2007. • Businesses located in qualiﬁed enterprise zones and renewal communities can claim up to $160,000 as section 179 expenses. • The cost limits established by section 179 are reduced by the amount by which the cost of qualiﬁed property exceeds $500,000. NOTE: Claiming the cost of assets as section 179 expense deductions is not always the best choice. Section 179 deductions should licensing items manufactured in the U.S., construction and substantial renovation of property, and some engineering or architectural services. CHANGES: For 2007, this deduction has increased from 3 percent to 6 percent of the lesser of qualiﬁed production activities income or taxable income for the year. NOTE: Some of the activities that can be deducted under section 199 are not immediately evident. In addition to the production activities listed above, qualiﬁed activities include developing computer software and production of sound recordings and certain ﬁlms. QUALIFIED JOINT VENTURE: WHO’S WITH YOU? BUSINESS AS USUAL: When a husband and wife are in business together, the IRS recognizes two possible relationships between the spouses. If one of the spouses has more control of the business than the other, the IRS considers the second spouse to be an employee subject to income tax, Social Security and Medicare withholding. But if both spouses have the same amount of control over the business and make similar contributions to it, the IRS considers their relationship a partnership. CHANGES: • The IRS now allows married couples who own a business together the option to not be considered a partnership for Federal tax purposes. • In order to qualify for the provision, the only members of the joint venture must be a husband and wife; both spouses must participate in the business; and both spouses must elect to have the provision apply. • Under this provision, each spouse may ﬁle a Schedule C (for their individual share of income and expenses), and Schedule S/E (to pay self-employment tax). NOTE The IRS has not yet provided detailed instructions on how spouses are to ﬁle their personal taxes, but the idea behind this law is to simplify the process. 43 * IN ORDER TO MAKE GROWTH AND EQUIPMENT RENEWAL MORE APPEALING TO SMALL BUSINESS, AN INCREASED AMOUNT OF EXPENSES CAN BE CLAIMED AS DEDUCTIONS. SECTION 179 EXPENSE DEDUCTION: WHAT’S NEW? BUSINESS AS USUAL: Usually when companies acquire capital assets such as new machinery, furniture or computer systems, the IRS requires that the company write off the cost of the assets over their depreciable life. This means that companies recover their investment over a period of several years. However, under section 179, some businesses have the option to deduct the entire cost (up to a limit) of eligible assets in the year they are placed in service. In order to make growth and equipment reHISPANIC ENTERPRISE be planned strategically and taking into consideration the ﬁnancial forecast of the company. It might be wise, however, to take advantage of this option before 2011, when limits on deductions are expected to go back to pre-2003 limits of $25,000. DOMESTIC PRODUCTION ACTIVITIES DEDUCTION: WHAT ARE YOU DOING? BUSINESS AS USUAL: Businesses engaged in what the IRS deﬁnes as “production activities” can take a tax deduction under section 199 of the tax code. Production activities include manufacturing, producing and growing personal property in the U.S., selling or October/November 2007

Table of Contents Feed for the Digital Edition of Hispanic Enterprise - October/November 2007

Hispanic Enterprise - October/November 2007 Contents BIZBUZZ: Business Briefs Trendsetters BIZTECH: Personally Digital BizLife - Travel: The Mobile Meeting Motoring: Is What You Drive, Who You Are? Q&A - Fact Tank for the Hispanic Population Hispanic Commerce Cover Story: Tiles with Style Success & Motivation: Grammy Whammy Finance: Talking Code Event: Masterminds NCLR Report - Improving your Triple Bottom Line Politics & Government: Keep on Truckin' Managing: Avoiding an Identity Crisis Franchising: Beyond the Brand Finance & Investing - Talking Money Movers & Shakers Regional Report - Louisiana, Louisiana Chamber Focus - On the Island of Enchantment

Hispanic Enterprise - October/November 2007

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