NKBA: New Tax Laws Seen Impacting Kitchen & Bath Firms

by WOHe

NKBA: New Tax Laws Seen Impacting Kitchen
& Bath Firms

Hackettstown, NJ – A series of provisions in
the new tax law should have a significant impact on small and
home-based businesses, including many firms serving the kitchen and
bath market, according to industry-related trade association and
tax specialists.

Among the new tax provisions of particular relevance, according to
the NKBA are the following:

  • Home Office Expenses: Beginning in 1999, if a
    home office is regularly and exclusively used for business, it will
    qualify as a deduction as the “principal place of business” if (1)
    the office is used for the administrative or management functions
    of a business, and (2) there is no other fixed location where the
    taxpayer conducts such functions for the business.
  • Health Insurance Deductions: Deductions for
    health insurance premiums for the self-employed have been increased
    as follows: 60% in 2002; 80% from 2003-2005; 90% in 2006, and 100%
    in 2007.
  • Capital Gains Tax Breaks: Retroactive to May
    7, 1997, the capital gains rate would be reduced from 28% to 20%
    (to 10% for those ordinarily in the 15% tax bracket). Assets sold
    after July 28, 1997 must be held for 18 months to be eligible for
    the favorable rate. Assets acquired after 2000 and held for more
    than five years would be taxed at a maximum rate of 18% (or 8% for
    those in the lowest tax bracket.)
  • Alternative Minimum Tax: The alternative
    Minimum tax is eliminated for corporations with gross receipts less
    than $5 million.
  • Estimated Tax Payments: Currently those who
    have income on which no taxes are withheld have to make quarterly
    payments of estimated taxes if they will be subject to at least
    $500 in taxes on the income. The new law doubled this threshold
    amount to $1,000 for all tax years beginning in 1998.
  • Capital Gain on Sale of Home: The new
    exemption from tax for up to $500,000 in capital gains on the sale
    of a home requires that any depreciation claimed for the home,
    including depreciation of a home office, must be subtracted from
    the exempt amount. Previously, it was possible to avoid capital
    gains attributable to the home office portion at the time of the
    sale by purchasing a more expensive home within two
    years.

The NKBA also emphasizes that having complete and accurate
financial record-keeping is critical to business success –
particularly at tax time, when having poor records could cause a
business to underpay or overpay its taxes.

NKBA financial advisors also note the importance of a solid
record-keeping system – whether on paper or on computer – that
suits the firm’s specific needs.

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