Executive Summary of 2006 Tax Legislation
List highlighting the tax changes
RE: Tax Increase Prevention and Reconciliation Act of 2005 signed May 17, 2006, Pension Protection Act of 2006 signed August 17, 2006
- CAPITAL GAINS & DIVIDENDS low rates extended through 2010 (15%, 5%, 0%).
- AMT exemption for 2006 set at $62,550 for married, $42,500 for singles.
- EXPENSING $100,000 LIMIT (inflation adjusted annually) extended through 2009. 2006 limit $108,000.
- $100,000 INCOME LIMIT for converting a traditional IRA to a Roth IRA ends after 2009.
- KIDDIE TAX threshold rose from age 14 to 18.
- FULL FUNDING of most pension plans required over a seven-year period.
- HIGHER CONTRIBUTION LIMITS for IRAs, SIMPLEs, 401(k) s, SEPs, 457 plans made permanent (generally were set to expire after 2010).
- ROTH 401(k) s made permanent.
- SAVER'S CREDIT made permanent and income phase-out adjusted for inflation after 2006.
- $500 RETIREMENT plan start-up credit for businesses made permanent.
- AGI PHASE-OUT ranges for IRA contributions indexed for inflation.
- NONSPOUSE BENEFICIARIES allowed to roll over distributions from decedent's retirement plan.
- TAX REFUNDS can be directly deposited into IRAs.
- NO 10% EARLY WITHDRAWAL PENALTY on early retirement plan distributions for certain military reservists and public safety employees.
- SECTION 529 plans favorable tax treatment made permanent.
- CASH DONATIONS will require bank record or written documentation from charity.
- CHARITABLE DEDUCTION for used clothing and household goods allowed only for items in "good" condition.
- CERTAIN IRA WITHDRAWALS directly donated to charity temporarily allowed tax-free.
Hope you find this quick list useful.