Ask a Business Expert

A: Yes, there are quite a few changes in tax laws that could benefit businesses next year. The Tax Relief and Health Care Act of 2006, the Pension Protection Act of 2006 and other changes have painted a new tax landscape for businesses in 2007. Here are some of the notable highlights:

1. New retirement plan breaks
   Limits on contributions and benefits under qualified retirement plans have increased over 2006 amounts, allowing for greater retirement savings for employees and greater deductions for companies. Also, these plans can offer individualized investment advice.
2. Higher rewards for capital investments
   Small businesses can opt to expense up to $112,000 of equipment purchases instead of depreciating them over five, seven or longer periods.
3. New incentives for hiring
   Hiring economically–disadvantaged workers can produce a new employment tax credit. The credit is a combination of the old work opportunity credit and welfare to work credit.
4. New incentives for R&D
   Increasing research activities qualifies for a 20% tax credit. Companies can opt to claim an alternative incremental credit, the percentages of which are higher in 2007 than in 2006 — and there's a new alternative simplified credit.
5. Higher driving write–off
   The IRS optional mileage rate for business use of a vehicle is 48.5¢ per mile in 2007. Using the optional rate avoids the need to track car expenses, but not the mileage and purpose of the travel.
6. Higher producer deduction
   The domestic production activities deduction doubles to 6% (up from 3% in 2006). This no–cost deduction can be claimed by profitable businesses that manufacture, build, grow or otherwise produce things in the U.S.