CCH on new tax bill: Businesses benefit, some families lose
‘Still some opportunities for family tax savings, but they’re quite limited’
RIVERWOODS, ILL. (Special CCH Tax Briefing) – Some wealthy families will help finance tax breaks for small business under the recently enacted Small Business and Work Opportunity Tax Act of 2007, according to CCH.
The tax provisions were part of larger legislation that also increased the minimum wage and provided funding for the Iraq war, signed into law on May 25. An expansion of the “kiddie tax†to cover children up to age 19 – up to 24 if they are college students – is one of the principal ways that the Act funds tax incentives to businesses, mainly small ones, as well as S corporation reforms.
Under the kiddie tax, a child’s unearned income in excess of $1,700 – income in the form of interest, capital gains and so on – is taxed at the parents’ top rate. This rule used to apply to children 13 years and younger. This allowed wealthy families to transfer assets to older teenagers and pay less tax as a family unit. Last year, though, Congress expanded the tax to cover children 17 years and younger, and this year’s change, effective for the 2008 tax year, limits the tax savings opportunities still further.
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