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MINIMUM WAGE INCREASE
Earlier this year, Governor Ed Rendell signed legislation increasing Pennsylvania's minimum wage by $2 per hour - phased in over the next two years. Under the new law, Pennsylvania's minimum wage will rise to $6.25 an hour Jan. 1, then to $7.15 an hour July 1.
The increase will take effect more slowly for employers with 10 or fewer full-time employees, but franchises of larger chains will not qualify for that exemption. Employers that do qualify will pay $5.65 an hour beginning Jan. 1; $6.65 beginning July 1; and $7.15 on July 1, 2008.
Source: The Morning Call - Monday, July 10, 2006
business mileage rates increase
Higher fuel and vehicle prices have pushed the standard mileage reimbursement rate to 48.5 cents for all business miles effective January 1, 2007. The new rate is four cents higher than the 2006 rate of 44.5 cents-per-mile. The standard mileage rate for moving and medical expenses also increases from 18 cents-per-mile to 20 cents-per-mile. The rate for the charitable deduction remains at 14 cents-per-mile.
- Comment. The business, medical and moving standard mileage rates are based on an annual study of the fixed and variable costs of operating an automobile conducted by an independent contractor for the IRS.
Generally, taxpayers can deduct the entire cost of operating a vehicle for business purposes. Deductible costs include gasoline, oil, tires, repairs, tools, parking, insurance, financing interest, taxes, licenses and depreciation.
Alternatively, taxpayers can use the business standard mileage rate. Their deduction is calculated by multiplying the standard mileage rate by the number of business miles traveled. This amount is deductible in lieu of operating and fixed costs, including depreciation, maintenance and repairs, tires, gasoline, oil, insurance and registration fees.
Depreciation componentThe depreciation component of the business standard mileage rate also rises for 2007. It was 17 cents-per-mile for 2005/2006 and increases to 19 cents-per-mile for 2007.
Charitable rate unchangedThe mileage rate for the charitable deduction will not change in 2007. Unlike the other mileage rate, the rate for the charitable deduction is set by statute and not by the IRS. It is 14 cents-per-mile for 2006 and will remain at that amount for 2007.
Special Katrina ratesAfter Hurricane Katrina hit, Congress enacted special tax incentives in the Katrina Emergency Tax Relief Act of 2005 (KETRA) to encourage taxpayers to help victims. These rates are set by statute and not by the IRS.
KETRA includes a special standard mileage rate to compute the amount allowable as a charitable contribution deduction for the cost of operating an automobile for the provision of relief related to Hurricane Katrina. Additionally, taxpayers may exclude from income amounts received from a charity as reimbursement for the cost of operating an automobile for the provision of relief related to Hurricane Katrina. The special KETRA rates are 32 cents-per-mile for a deduction and 44.5 cents-per-mile for reimbursements through December 31, 2006. Congress has not extended any special Katrina-related rates into 2007.
LimitationsThe business standard mileage rate may not be used to compute the deductible expenses of:
- Automobiles used for hire (or five or more automobiles owned or leased by a taxpayer and used simultaneously);
- An automobile leased by a taxpayer unless the taxpayer uses either the business standard mileage rate or a fixed and variable rate allowance (FAVR allowance) to compute the deductible business expenses of the automobile for the entire lease period (including renewals);
- An automobile for which the taxpayer has claimed depreciation using a method other than straight-line for its estimated useful life, claimed a Code Sec. 179 deduction, claimed the special depreciation allowance under Code Sec. 168(k), or used the Accelerated Cost Recovery System (ACRS) under former Code Sec. 168 or the Modified Accelerated Cost Recovery System (MACRS) under current Code Sec. 168.
- The amount of the deductible automobile expenses of an employee of the U.S. Postal Service incurred in collecting and delivering mail on a rural route if the employee receives qualified reimbursements.
- Comment. Employers may use a FAVR method to reimburse employees who supply their own car, whether owned or leased. For 2007, the standard automobile cost used to compute a FAVR allowance may not exceed $27,600 (up from $27,400 for 2006).
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lehigh valley half marathon
Planning to make a New Year’s resolution to exercise more? Are you looking to shed a few extra holiday pounds? Or maybe you already enjoy a good workout? Why not give yourself a goal for the upcoming year and register to join the Stortz team in the 2007 Lehigh Valley Half Marathon & 5K?!
As the presenting sponsor for this event, we’d love to see you there. Come out and join the fun!
Race Date: Sunday, April 29, 2007
Register @ http://www.lehighvalleyhalfmarathon.com/
THE NEW ENERGY TAX ACTS
The two new energy tax acts that passed in August 2005 provide several opportunities for saving money on your taxes if you make certain improvements to your home or if you buy certain vehicles.
Residential Energy Property CreditIndividual taxpayers can claim up to $500 credit for installing qualifying energy efficient property in a personal residence. $500 is a lifetime credit, meaning the total amount of credit taken over a person’s lifespan cannot exceed that amount. The credit is available on property placed in service during the 2006 and 2007 tax years only.
There are two different ways of qualifying for and calculating the credit:
- Improvements: Receive 10% credit for qualified energy efficient improvements to a building.
- Purchases: Receive 100% credit for energy property purchases. The maximum dollar limit for purchases is:
- $50 for each advanced or main air circulating fan.
- $150 for each qualified natural gas, propane or oil furnace, or hot water boiler.
- $300 for qualified energy efficient property including heat pumps, water heaters, and central air conditioners.
Residential Energy Efficient Improvements
Individual taxpayers can claim a 30% credit for the following qualified energy efficient improvements:
- Photovoltaic property expenditures or technology using solar cells to convert sunlight into electricity. The 30% credit will be limited to a maximum of $2,000 and applies to equipment placed in service during 2006-2007.
- Solar water heating expenditures typically consisting of a solar collector and a water storage tank. The 30% credit is limited to a maximum of $2,000.
- Fuel cell expenditures or fuel cells that use hydrogen and oxygen to create electricity. The 30% credit is limited to a maximum of $1,000.
The residential credit will be available on property placed in service in 2006 and 2007. Additionally, the credit cannot be taken against AMT. Unlike the Residential Energy Property Credit, any unused credit in 2006 can be carried forward to 2007.
Alternative Motor VehicleVehicles that use alternative fuels or fuel methods will also qualify a taxpayer for one of the new credits. Vehicles that use one of the following four criteria qualify:
- Qualified fuel cell motor vehicle.
- Advanced lean burn technology motor vehicle.
- Qualified hybrid motor vehicle.
- Qualified alternative fuel motor vehicle.
Unlike the Residential Energy credit, the Alternative Motor Vehicle does not specify a specific amount. Instead, the monetary value of the credit is based on several factors. The IRS website provides tables for use in determining the credit available for specific vehicles as well as a list of qualifying vehicles.
Please keep in mind that these items are a reminder of tax savings available to individuals this year. There are also other energy credits available for Schedule C or business returns.
For more information on additional credits, definitions, and limitations, visit the IRS website at http://www.irs.gov/. Look for IRS publications and instructions in the text and analysis of the Energy Policy Act of 2005.
NOTE: Not all energy-improving appliances and installations qualify for this credit. Please check your manufacturer’s label and refer to the IRS’ website for complete rules and guidelines.
Source: Taxing Subjects, v. 6: i. 2