10/ 01/ 2008
by Shannon McRae
An AMT patch and extensions of the restaurant/leasehold tax incentives and the optional sales tax deduction were included in H.R. 6049, which passed the House this summer. At press time, the Senate had not yet acted on its version of the bill. NFIB will continue to push lawmakers to make these changes and help our nation’s small business owners.
Alternative Minimum Tax: In the four decades since the AMT was enacted, its reach has crept from the very wealthy to average, middle-class American taxpayers—many of whom are small business owners. Those affected by the AMT are forced to calculate their taxes twice, and then pay the higher amount. These taxpayers may realize savings under the regular tax code, but they face different scenarios under the AMT. The AMT increases your taxable income base by adding back items that were exempt under the regular tax system and disallowing deductions and credits.
Since 1998, Congress has passed temporary patches to the AMT that reduce the number of taxpayers affected by raising the exemption amount.
Restaurant/Leasehold Tax Incentives: Up until 2008, owners of restaurant and leasehold properties benefited from a shortened 15-year depreciation period for certain improvements to their property. Shortening the period from 39.5 to 15 years better reflects the wear and tear of these business properties and provides a tax incentive to make improvements. The provision expired at the end of 2007, and the depreciation timeline reverted to 39.5 years, putting these businesses at a competitive disadvantage.
State and Local Sales Tax Deduction: Another provision that expired at the end of 2007 is the option for taxpayers who itemize their deductions to deduct state and local sales taxes. This tax deduction is especially beneficial to taxpayers in states that have a sales tax but no income tax.
