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Interesting Facts About The New Business Tax Law - Articles Surfing
Before getting involved into any business deductions, one should first have a good understanding of the business tax law. The business tax law involves the taxation of income and property acquired through professional efforts. In addition to income tax, there is sales tax, capital gains tax, property tax, and other areas of tax. Every business liable for income tax must keep a record of all transactions made so that the total amount of the gross income can be estimated. The interesting thing about business tax law are the changes made by the Bush administration with the 'Tax Increase Preven-tion and Reconcilia-tion Act of 2005.' This act includes several important business tax changes that will examine.
The new business tax law allows small business to deduct up to $100,000 of investments in qualifying depreciable assets through 2007. Also, under current law, the domestic manufacturing deduction is also limited to 50% of a taxpayer's total W-2 wages. The new law modifies the wage limitation so that taxpayers may only include W-2 wages that are deducted in arriving at qualified production activities income.
For all you business owners out there, there are some advices that you can use in respect to those business tax law changes. First of all, you can continue to treat dividend payments at the lower rate.
The main business tax increases in the new law consists of - limiting the foreign earned income exclusion for housing expenses; repealing the foreign sales corporation and extraterritorial income exclusion benefits for certain "grandfathered" contracts; denying tax-free treatment to certain "cash-rich" spin-off transactions; and requiring withholding after 2010 on government contract payments.
The act also modifies certain corporate estimated tax payment requirements for large corporations (those with a minimum of $1 billion in assets), requires reporting of interest on tax-exempt bonds, and applies the earnings-stripping rules to corporate partners. Other business revenue-raisers affect foreign investors in U.S. real estate, major integrated oil companies and pooled financing bonds. Find out more about tax law and tools at http://www.localtaxabatement.com
According to the new business tax law, the self-employed tax contribution base is increased from $94,200 to about $102,000 in 2008. The self-employment tax rate continues to be 15.3%. The full rate applies to the first $102,000 of self-employment income; after that only the 2.9% Medicare tax applies.
Keep in mind that US business are taxed on their worldwide income. In other words, no matter where your business earns money from (in terms of geographic locations), it's still treated as income taxable in the US. There is just one exception to this rule and it's only if your business is located outside of the US and you reside there for most of the year.
Copyright © 1995 - Photius Coutsoukis (All Rights Reserved).
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