| |
The following are some of the tax deductions which may now be available to certain taxpayers.
Note that many are subject to limitations based on your level of adjusted gross income.
Write-Off of Fixed Asset Additions
For 2006, the total cost of fixed asset purchases you can elect to deduct currently under Section 179 of the Internal Revenue Code increases to $108,000. Phase out of the deduction only occurs when the total cost of such purchases exceeds $430,000. The deduction will revert to $25,000 for $2010.
Individual Retirement Accounts
IRA's remain an attractive option for retirement savings. Through 2006, you can contribute up to $4,000 to an IRA or combination of IRA's. And, if you are age 50 or older, you can contribute up to a total of $5,000 in 2006. Earnings grow tax deferred, and contributions to a traditional IRA may be deductible depending on your income level.
Telephone Tax Refund
Individuals will be able to claim the telephone excise tax refund on their 2006 income tax return. The standard refund for individuals will range from $30 to $60 based on number of exemptions claimed. Alternatively, taxpayers can choose to figure their refund using the actual amount of tax paid for the applicable period.
401(k) Contributions
The maximum amount that you can contribute increases in 2006 to $15,000. Individuals age 50 or over may be able to contribute up to $20,000.
Exemption Amount
The amount you can deduct for each exemption has increased from $3,200 to $3,300 in 2006.
Capital Gains Tax Rates
For sales or exchanges made, or installment payments received after May 5th, 2003, the previous 10% and 20% rates on long-term capital gains remain at 5% and 15% respectively through 2010.
Qualified Dividends Taxed at Long-Term Capital Gains Rates
Qualified dividends paid on stocks held in taxable accounts will continue to be taxed through 2010 at a maximum tax rate of 15%.
Child Tax Credit
For 2006, the child tax credit for qualifying children (under the age of 17) remains at $1,000. The credit begins to phase out when AGI reaches $110,000 for join filers.
Some alternative Minimum Tax Relief (AMT)
For 2006, the exemption amount remains at $62,550 for joint filers, but it will not eliminate the AMT for many higher income taxpayers.
Social Security and Medicare Taxes
For social security tax, the maximum amount of 2006 wages sugject to the tax is increased to $94,200. For Medicare tax, all covered 2006 wages are subject to the tax.
Education Credits
For 2006, the maximum Hope credit is increased to $1,650. The amount of your Hope or Lifetime Learning Credit is phased out if your AGI is between $90,000 and $110,000 if you filed a joint return.
Residential Energy Credits
You may be eligible for two new credits, the non-business energy property credit and the residential energy efficient property credit, for making energy saving improvements to your home in 2006. Credits of up to $500 are available when you purchase items like insulation, new windows, furnaces, water heaters, etc.
Adoption Benefits
Beginning in 2006, the maximum adoption credit has increased to $10,960.
Annual Gift Exclusion
For 2006, the annual exclusion for gifts made to a donee during the calendar year is increased to $12,000.
Donate your Annual Required Minimum Distribution to a Charity
A new law allows individuals aged 70 and a half or older to distribute up to $100,000 of their IRA balace to charitable organizations in 2006 and in 2007 without recongizing income. No charitable contribution deduction may be claimed but the distribution counts toward the required minimum distribution.
Certain Hybrids Qualify for Tax Credit
Effective for qualifying vehicles placed in service after 2005, a taxpayer may claim an alternative motor vehicle credit. The credit is based on various factors such as vehicle weight and fuel efficiency.
Social Security Benefits
Individuals who are under 65 and are collecting social security can earn $12,480 without their benefits being reduced. If you are over 65, there is no limit on your earnings.
Standard Mileage Rates
For 2006 the allowable deductions for the standard mileage rates are increasing to 44.5 cents for business miles and 18 cents for medical transportation.
Self-Employed Health Insurance
For 2006, self-employed individuals continue to be able to deduct 100% of the health insurance premiums paid on behalf of the individual and his/her family.
SOME ADVERSE CHANGES TO CONSIDER
For 2006, the Kiddie Tax kicks in on a child's investment income in excess of $1,700. A new law raises the age limit from 14 to 18 immediately.
If you are an educator you were able to deduct up to $250 of qualified expenses. This deduction expired in 2005, and has not been reinstated.
The deduction for state and local general sales taxes has expired and will not apply for 2006.
The tuition and fees deduction has also expired and will not apply for 2006.
|
