Tax Law Changes : Tax-Year 2006 Businesses
Pick a topic from the list below to learn about the tax changes:
- Depreciation and Section 179 expense
- Self-employment tax
- Social security and Medicare taxes
- Standard mileage rate
Increased section 179 limits. The maximum section 179 deduction you can elect for property you placed in service in 2006 is increased to $108,000 for qualified section 179 property. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $430,000.
More information. Publication 946, How to Depreciate Property , has more information on these rules.
The self-employment tax rate on net earnings remains the same for 2006. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
The maximum amount subject to the social security part for tax years beginning in 2006 has increased to $94,200. All net earnings of at least $400 are subject to the Medicare part.
For 2006, the employer and employee will continue to pay:
- 6.2% each for social security tax (old-age, survivors, and disability insurance), and
- 1.45% each for Medicare tax (hospital insurance).
Wage limits. For social security tax, the maximum amount of 2006 wages subject to the tax has increased to $94,200. For Medicare tax, all covered 2006 wages are subject to the tax. Circular E (Publication 15), Employer's Tax Guide, has more information about these taxes.
For 2006, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for your business is 44.5 cents a mile for all business miles driven.