New tax breaks for small businesses/self-employed individuals
The self-employed health insurance deduction has been increased to 40% in 1997, 45% for '98 and '99, and up; until in the year 2007 you can deduct 100%. The California state tax book states that the State has conformed to this law.
The maximum Section 179 (instant depreciation) that can be taken for a business has been increased to $18,000 for 1997 and phased in until it reaches $$25,000 in 2003. These increases were never adopted by California.
New SIMPLE retirement plan for certain employers and also the self-employed: You can establish a SIMPLE retirement plan which is similar to a 401K in that you can defer tax on it and, if you are not SELF-employed, your employer can match your contributions. It can be either an IRA or a 401K. You can contribute up to $6,000 per year. The employer must make matching or nonelective contributions under a specific formula. This plan is not subject to nondiscrimination rules. These laws will not affect the old SEP plans, but have eliminated SARSEP plans.