As the tax season quickly approaches, there are some key changes in the tax law in 2006 that will affect your 2006 tax returns. The following are what I collected from IRS website:
Earned Income for Additional Child Tax Credit: The minimum earned income amount used to figure the additional child tax credit is $11,300.
Alternative Minimum Tax: The AMT exemption amount is $42,500 ($62,550 if married filing jointly or qualifying widow(er); $31,275 if married filing separately). The minimum exemption amount for a child under age 18 is $6,050.
Archer MSA Limits: The minimum annual deductible of a high deductible health plan is $1,800 ($3,650 for family coverage). The maximum annual deductible of a high deductible health plan is $2,700 ($5,450 for family coverage). The maximum out-of-pocket expenses limit is $3,650 ($6,650 for family coverage).
Restrictions on Charitable Contributions: After August 17, 2006, all cash contributions must be supported by a dated bank record or a dated receipt and no deduction is allowed for most contributions of clothing and household items unless the donated property is in good used condition or better.
Direct Deposit of Refund: Your refund can be split among up to three different accounts, such as savings accounts, checking accounts, and other accounts, including individual retirement arrangements (IRAs), that have valid routing and account numbers.
Earned Income Credit Amounts: If you have more than one qualifying child and you earn less than $36,348 ($38,348 if married filing jointly), or you have one qualifying child and you earn less than $32,001 ($34,001 if married filing jointly), or you do not have a qualifying child and you earn less than $12,120 ($14,120 if married filing jointly).
Income Limits for Reduction of Education Savings Bond Exclusion: If your filing status is married filing jointly or qualifying widow(er), your interest exclusion is phased out if your modified adjusted gross income (MAGI) is between $94,700 and $124,700, and no deduction if your MAGI is $124,700 or more. For all other filing statuses, your interest exclusion is phased out if your MAGI is between $63,100 and $78,100.
Electric and Alternative Motor Vehicles: The tax credit for hybrid vehicles could be as much as $3,400.
Exemption Amount: Each exemption is now $3,300. Also the phaseout limits increased: $112,875 for married persons filing separately; $150,500 for single individuals; $188,150 for heads of household, and $225,750 for married persons filing jointly or qualifying widow(er)s.
Health Savings Account (HSA) Deduction Limits: The maximum HSA deduction is $2,700 ($5,450 for family coverage). For HSA purposes, the minimum annual deductible of a high deductible health plan is $1,050 ($2,100 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit is $5,250 ($10,500 for family coverage).
Limit on Itemized Deductions: If your AGI is above $150,500 ($75,250 if married filing separately), you may lose part of your itemized deductions.
Standard Deduction Amount: $7,550 for head of household; $10,300 for married taxpayers filing jointly and qualifying widow(er)s; $5,150 for married taxpayers filing separately; and $5,150 for single.
Standard Mileage Rates: 44.5 cents/mile for business miles, 14 cents/mile for charitable services, 18 cents/mile for medical reasons, and 18 cents/mile for moving.
For more details on tax law changes in 2006 and what will happen for 2007 tax year, go to IRA website.
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