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Congress passed the Iraq funding bill, which includes an increase in the minimum wage and related small business tax breaks. President Bush vetoed the first bill and the House and the Senate scrambled to craft a new one that both Congress and the president can agree on since it’s tied to funding for the Iraq war.

Key provisions include:

  • Expansion of the Work Opportunity Tax Credit for disabled veterans and others.
  • An increase in the Section 179 deduction limit to $125,000 and the phaseout to $500,000 for 2007.
  • Full tip credit allowed for businesses despite a minimum-wage increase.
  • Simplified filing rules for certain family-owned businesses.
  • S corp reforms such as elimination of gains from stock sales as an item of passive-investment income.

These tax breaks could be offset by revenue earned from raising the kiddie-tax limit from age 18 to 19 (or age 24 for full-time students).

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