Gimme a Tax Break
The new federal minimum-wage law, passed in May, came with some $4.8 billion in tax breaks for small business. While the minimum wage rises to $7.25 an hour over the next two years, these new tax breaks are intended to ease the burden on business owners.
What's in it for you? Two of the law's provisions provide most of the financial relief, and they're fast-acting, going into effect this year.
- Work Opportunity Tax Credit: This credit for hiring specific classes of workers has been slightly expanded and extended through 2011; it was due to expire this year. In general, businesses can take a credit for 40 percent of the first $6,000 in wages paid to a new employee from a qualifying group, such as high-risk youth. Under the new law, many disabled veterans, seniors and workers in population-losing rural areas join the qualifying list.
- Section 179 deductions: This rule allows businesses to take an immediate write-off for equipment rather than depreciating it over time. The amount owners can write off rises from $112,000 to $125,000 for 2007 and will index for inflation annually through 2010. The phaseout on the total size of a business's equipment expenditure also rises, from $450,000 to $500,000.
Seattle writer Carol Tice reports on business and finance for The Seattle Times, Seattle Magazine and other leading publications.