Masonry Magazine August 1998 Page. 14
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14 MASONRY-JULY/AUGUST. 1998
Tax Relief or Headaches?
Continued from page 12
$10,000 in wages the second year of employment. Imagine Uncle Sam, in the form of this tax credit, helping subsidize any workers you hire from the welfare roles to the tune of $3,500 to $5,000 per year.
Those masonry contractors doing business at home or wanting to do business at home will save an estimated $880 million over the next five years under a plan that revises the definition of principal place of business for home office deductions. The new definition provides that a home office will qualify if it is used by the masonry contractor to conduct administrative or management activities and there is no other fixed location where the taxpayer conducts "substantial administrative or management activities.
That recent legislation also increased the health insurance deduction for on for every self-employed masonry contractor. The deduction was already set to increase to 80 percent of the amount paid by the year 2006 under our current tax rules. The new law, instead, will raise it to 100 percent of self-employed health insurance costs by the year 2007.
House Republicans agreed to drop an independent contractor safe harbor. A House aide explained that the provision's interaction with Social Security would have made it vulnerable to a parliamentary point of order known as the "Byrd Rule" named after Senator Robert C. Byrd, D-W.Va., who created it.
Extended are such expiring provisions as: (1) the research tax credit from May 31, 1997 to June 30, 1998; and (2) the Work Opportunity Tax Credit from September 30, 1997 to June 30, 1998.
In addition to the new provisions contained in the Taxpayer Relief Act of 1997, the on-again, off-again educational assistance section of our tax law has been given a new and longer lease on life. Tax-free educational assistance provided by employers has been extended for another three years to cover courses beginning before June 1, 2000. The tax-free status of this employee benefit has been extended one year at a time for the past several years and had officially expired at the end of June, 1997.
It is the rare masonry contractor who has not had occasion to sell assets. The new reduced rates for capital gains will henceforth ensure that more of any profits realized from sales of capital equipment or property will remain in their pockets.
A reduction that became effective last May 7, 1997, reduced the capital gains rate from a maximum of 28 percent to a maximum of 20 percent (10 percent for those in the 15 percent tax bracket) with an 18-month holding period required for assets sold after July 28, 1997. Assets sold after July 28th of last year and held for more than 12 months, but less than 18 months, will be taxed at the "old" rate of a maximum of 28 percent.
After December 31, 2000, capital assets with a five-year holding period would qualify for an 18-percent rate (8 percent for those in the 15 percent tax bracket).
It is not all a mistake
That Taxpayer Relief Act of 1997 was signed into law only last year, but already the list of mistakes contained in the legislation has begun to grow. Mismatched effective dates, legislative language that disagrees with the Joint Committee On Taxation's conference report and entire sections simply missing are among the problems lawmakers will have to fix.
Unfortunately, fixes to last year's tax bill could take awhile. Consider that this tax legislation made technical corrections to legislation enacted as long ago as the Tax
Continued on page 22