Business Tax Updates for year 2007

TOPICS: all new information for 2007 tax year

Spouses' Partnership May Elect Out of Partnership Rules Election to Expense Depreciable Property (IRC Section 179) Business Use of Automobiles

Spouses' Partnership May Elect Out of Partnership Rules

A "qualified joint venture" (which would include a partnership) conducted by a married couple filing together (joint tax return), may elect out of the partnership rules and report their respective income (or loss) amounts directly on their Individual Income Tax Return. A "qualified joint venture" is one where the only members are a husband and wife who both materially participate in the trade or business, and where both spouses consent to the election. Each spouse would report their share of the joint venture on separate appropriate schedules attached to the tax return (e.g. Schedule C for a sole-proprietorship, in which case each spouse would also include separate Schedules SE for Social Security contributions if applicable).

Election to Expense Depreciable Property (IRC Section 179)

The maximum amount of the cost of otherwise depreciable property, which can be treated as an immediate expense rather than depreciated over a period of years, has been increased for 2007 tax returns. The maximum amount that may be treated as an expense is $ 125,000. This maximum amount available begins to phase-out as the total amount of depreciable property purchased in the year exceeds $ 500,000. The maximum amount would have been $ 112,500 (as adjusted for inflation from the 2006 amount) but the 2007 Small Business Act increased that amount. The property that qualifies for the election is generally tangible personal property used in an active trade or business.

Business Use of Automobiles

The standard mileage rate, allowed as a deduction against income, for sole-proprietors and employees, has been increased to 48.5 cents per mile for 2007 tax returns. For 2008 returns it will be raised to 50.5 cents per mile. This deduction may be chosen instead of deducting actual operating expenses that may be allocated to the business use portion of automobile use in the year. The maximum amount of the purchase price of a Sports Utility Vehicle placed in service in 2007 (that has a Gross Vehicle Weight in excess of 6,000 pounds) that may be taken as an expense remains at $ 25,000. Any additional portion of the cost, attributable to business use, must be depreciated.