The $70 billion five-year tax bill passed by Congress on May 10 contains some benefits for small businesses. President Bush said he will sign it into law.
The legislation extends:
* A reduced tax of 15 percent on capital gains and dividend income (originally due to end 2008), to the end of 2010.
* A tax cut letting small businesses write off up to $100,000 in investments in equipment and other depreciable assets, through the end of 2009. A provision to close an inventory accounting practice known as ¡°last in, first out,¡± used by businesses to help lower their taxes, isn¡¯t in the final bill.
* Extend alternative minimum tax exemptions for upper-middle-income families to the end of 2006. The AMT was originally intended only on the most wealthy, but it is now common for taxpayers with incomes of $100,000 or more, especially those in high-tax states, to pay it.
* Eliminate for 2010 the $100,000 income limitations on converting traditional retirement accounts to Roth IRAs. Money shifted to Roth IRAs would be taxed when converted, but can be withdrawn tax-free at retirement.
A follow-up bill with more tax breaks backed by both Republicans and Democrats (including extending tax deductions for state and local sales taxes, college tuition tax deduction and a research and development tax credit for businesses) is expected in the soon.
A push is also expected this summer to make other tax cuts permanent, including repeal of the estate and gift tax, both due at the end of 2010.