This legislation bundled a minimum wage increase with several tax breaks for small businesses.
Small Business Incentives
- Section 179 Expensing: The limit for expensing equipment purchases will increase gradually from $17,500 in 1996 to $25,000 by 2003.
- Home Office Deduction: Clarified to allow deductions for space used to store product samples, not just inventory.
- Worker Classification: Section 530 safe harbor rules were strengthened, shifting the burden of proof to the IRS in many independent contractor disputes.
- Leasehold Improvements: Landlords can now deduct the remaining basis of leasehold improvements when a tenant leaves.
- Gas Stations: Convenience stores at gas stations are now depreciated over 15 years.
Health Provisions
- Self-Employed Health Insurance: The deduction increases from 30% to 40% in 1997, eventually reaching 80% in 2006.
- Medical Savings Accounts (MSAs): A pilot program allows small businesses (under 50 employees) and self-employed individuals to set up tax-free savings accounts for medical expenses when paired with a high-deductible health plan.