Small Employer Pension Plan Start-up Costs Credit

In order to encourage small businesses to establish and maintain retirement savings accounts for employees, Congress has enacted a law that gives a tax credit to eligible small businesses for some of the costs of establishing new eligible retirement plans. The credit equals half of the start-up costs incurred, not to exceed $500 in any tax year, and it may be claimed for qualified costs incurred in each of the three years beginning with the tax year in which the plan becomes effective.

Tax Implications of Tuition Reimbursements

If you receive tuition reimbursement from your employer for undergraduate or graduate level courses, you may not have to include the payment in taxable income if it satisfies certain Internal Revenue Service requirements. First, the reimbursement must be pursuant to a qualified educational assistance plan, and second, it must not exceed $5,250 each year. If the reimbursement meets both of these requirements, your employer should not include the benefit with your wages, tips, and other compensation.

New Tax Breaks for Military Personnel and Their Families

In response to the wars in Afghanistan and Iraq, Congress enacted the Military Family Tax Relief Act of 2003 to provide certain tax breaks for military personnel and their families. These new provisions exclude certain benefits and gains from income, thereby reducing tax liability.

Research and Experimental Costs in a Business

Frequently, a business incurs costs for activities that are intended to provide information to help eliminate uncertainty about the development of a new product or the improvement of an existing product. Whether costs qualify as research and development costs depends exclusively on the nature of the activity to which the costs relate, not to the nature of the product being developed or to the level of technological advancement.

Alternative Minimum Tax for Individuals

Congress enacted the alternative minimum tax (AMT) to prevent any taxpayer with substantial income from avoiding at least a minimum tax liability. High-income taxpayers often benefit from huge tax savings by making use of certain deductions, credits, exemptions, and losses, and without the AMT, they might be able to completely and legally escape income taxation. The AMT is a separate tax computation that basically eliminates many deductions and credits. It works to recapture some of those tax breaks available primarily to high-income taxpayers and to maintain tax equity.