PricewaterhouseCoopers 2008 Guide to Tax and Financial Planning

Chapter 1. What Tax Changes Apply in 2007?

Taxes influence many business and some personal decisions. Your ability to understand and work with the various complex rules and regulations of the federal tax law can provide an advantage in business. Many people believe major tax changes are on the horizon. Taxpayers and their professional advisors will be required to learn, understand, and act on these changes if they are to succeed in their endeavors. This chapter outlines the impact of recently enacted laws as well as changes from previously signed legislation. In addition, numerous pieces of legislation during 2006 and early 2007 contained tax changes affecting individuals and their businesses. These changes and the planning opportunities they present are examined in this chapter and throughout this book.

Highlights of Recently Enacted Legislation

During the second half of 2006 and the first half of 2007, numerous pieces of legislation were enacted that included tax changes affecting individuals.

Tax Increase Prevention and Reconciliation Act

On May 17, 2006, the president signed the Tax Increase Prevention and Reconciliation Act of 2005. The enactment date for this legislation and the effective date for many of its provisions is May 17, 2006.

This legislation extended many key tax breaks, such as:

• A two‐year extension of the reduced tax rates on long‐term capital gains and qualified dividends through 2010.

• A two‐year extension of the Code Section 179 small business expensing election. ...