Highlights of the new tax law are as follows:
- Under the new law, the limitation for expensing of fixed asset additions is increased to $125,000 for tax years beginning in 2007 through 2010. This $125,000 deduction is phased out by the amount by which all qualifying property placed in service exceeds the investment limitation of $500,000, which is indexed for inflation for 2008-2010.
- The Work Opportunity Tax Credit, which was put in place to encourage employers to hire individuals from economically-challenged environments, has been extended to cover employees hired through August 31, 2011. Further, the scope of the credit has been broadened to cover a greater population of potential employees.
- The new law has expanded the “kiddie tax” rules for tax years beginning after May 25, 2007 (the 2008 tax year). The age limit has been raised to include (a) all children under age 19 and (b) students under age 24. The negative impact of this expansion is that college students with brokerage accounts that would have historically been liquidated to cover tuition expenses will now be subjected to paying tax on any gains generated at their parents’ marginal tax rates.
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