Tax Year 2006
Alternative Fuel Vehicle Refueling Property Credit
You may be able to claim this credit if you place qualified alternative fuel vehicle refueling property in service for business or personal use after 2005. This includes certain property used to store or dispense a clean-burning fuel or recharge motor vehicles propelled by electricity. For more information, see Form 8911, Alternative Fuel Vehicle Refueling Property Credit.
Alternative Motor Vehicle Credit
You may be able to claim this credit if you place an alternative motor vehicle in service for business or personal use after 2005. An alternative motor vehicle must meet certain requirements and be a new:
- Advanced lean burn technology vehicle,
- Qualified alternative fuel vehicle,
- Qualified fuel cell vehicle, or
- Qualified hybrid vehicle.
For more information, see Form 8910, Alternative Motor Vehicle Credit.
Depreciation and Section 179 Expense
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.
Employer-owned life insurance contract
If you are the policyholder of an employer-owned life insurance contract, you must include in income any life insurance proceeds received that are more than the premiums and any other amounts you paid on the policy. Generally, this applies to contracts issued after August 17, 2006. You are subject to this rule if you have a trade or business, you own a life insurance contract on the life of your employee, and you (or a related person) are a beneficiary under the contract. For exceptions to this rule, see Publication 525, Taxable and Nontaxable Income.
Self-Employment Tax
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.
Social Security and Medicare Taxes
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.
Standard Mileage Rate
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.
Tax Years 2007 and Later
Depreciation and Section 179 Expense
Increased section 179 limits. The maximum section 179 deduction you can elect for property you placed in service in 2007 is increased to $112,000 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 $450,000.
More information. Publication 946, How to Depreciate Property , has more information on these rules.
Self-Employment Tax
The self-employment tax rate on net earnings remains the same for 2007. 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 2007 has increased to $97,500 from $94,200 in 2006. All net earnings of at least $400 are subject to the Medicare part.
Social Security and Medicare Taxes
For 2007, 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 2007 wages subject to the tax has increased to $97,500 from $94,200 for 2006. For Medicare tax, all covered 2007 wages are subject to the tax. Circular E (Publication 15), Employer's Tax Guide, has more information about these taxes.
Standard Mileage Rate
For 2007, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck is increased to 48.5 cents a mile for business miles driven.
Qualified Transportation Fringe Benefit
For taxable years beginning in 2007, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $110. The monthly limitation regarding the fringe benefit exclusion amount for qualified parking is $215.
Page last updated -- 01-FEB-2007
