Tax Law Changes for 2007

First-Year Expensing of Depreciable Property

The maximum section 179 deduction you can elect for new or used property you placed in service in 2007 is increased to $112,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $450,000.

Self-Employment Tax ( just another name for Social Security and Medicare Tax)

The social security wage base has increased for 2007 from $94,200 to $97,500.

The medicare wage base is unlimited.

The social security tax remains the same. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Standard Mileage Rate

For 2007, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck is increased to 48.5 cents a mile for business miles driven. This rate includes the depreciation, fuel, maintenance, insurance and other cost of operating the vehicle. (the rate was 44.5 cents in 2006)

If you elected to deduct actual expenses when you first used the vehicle for business, then you will do that instead of using the mileage rate.

Domestic Production Deduction

Companies can deduct 6% of income from U.S. production activities such as manufacturing and construction. The prior write-off was 3%.