Thursday, January 04, 2007

2006 Basic Tax Changes

The basic standard deduction amounts for tax payers who do not itemize deductions for 2006 are:

Head of household — $7,550
Married taxpayers filing jointly and qualifying widow(er)s — $10,300
Married taxpayers filing separately — $5,150
Single — $5,150

The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $850 or the sum of $300 and the individual's earned income.

The amount you can deduct for each exemption (yourself and each dependent) has increased from $3,200 in 2005 to $3,300 in 2006.
You may lose part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2006, the phaseout begins at:

$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.

For tax years beginning in 2006, the allowable deductions for the standard mileage rate, if you do not use actual vehicle expenses, are as follows:

Business miles. The standard mileage rate for the cost of operating your car changes to 44.5 cents a mile for all business miles driven.

Charitable services. The standard mileage rate allowed for use of your car when you use your car to provide charitable services to a charitable organization is 14 cents a mile.

Charitable services — Hurricane Katrina relief services. If you used your vehicle in giving services to a charitable organization to provide relief related to Hurricane Katrina, the standard mileage rate allowed for use of your car is 32 cents a mile.

Medical reasons. The standard mileage rate allowed for use of your car for medical reasons is 18 cents a mile.

Moving. The standard mileage rate for determining moving expenses is 18 cents a mile.



Traditional IRA contribution and deduction limit. If you will be age 50 or older in 2006, the most that can be contributed to your traditional IRA for 2006 will be the smaller of:

$5,000, or
Your taxable compensation for the year.

Roth IRA contribution limit. If you will be age 50 or older in 2006 and contributions on your behalf are made only to Roth IRAs, your contribution limit for 2006 will generally be the smaller of:

$5,000, or
Your taxable compensation for the year.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced.


Earned income Credit amount.
The maximum amount of income you can earn and still get the credit is higher for 2006 than it is for 2005. You may be able to take the credit for 2006 if:

You have more than one qualifying child and you earn less than $36,348 ($38,348 if married filing jointly),
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).

The maximum amount of adjusted gross income (AGI) you can have and still get the credit has also increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.
Investment income amount.

The maximum amount of investment income you can have in 2006 and still get the credit increases to $2,800.

Child Tax Credit

This credit is for people who have a qualifying child. It is in addition to the credit for child and dependent care expenses (on Form 1040, line 48; Form 1040A, line 29; or Form 1040NR, line 45) and the earned income credit (on Form 1040, line 66a; or Form 1040A, line 40a).

The maximum amount you can claim for the credit is $1,000 for each qualifying child.

Qualifying Child

A qualifying child for purposes of the child tax credit is a child who:

Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild),
Was under age 17 at the end of 2006,

Did not provide over half of his or her own support for 2006,
Lived with you for more than half of 2006. Was a U.S. citizen, a U.S. national, or a resident of the United States. If the child was adopted, see Adopted child below.

Additional Child Tax Credit

This credit is for certain individuals who get less than the full amount of the child tax credit. The additional child tax credit may give you a refund even if you do not owe any tax.


Tax Change to look for in 2007


Restrictions on Charitable Contributions

Cash contributions.

All cash contributions made in tax years beginning after August 17, 2006, to any qualified charity must be supported by a dated bank record or a dated receipt. The tax year for most individual taxpayers begins on January 1.

Clothing and household items.

Beginning with contributions made after August 17, 2006, no deduction is allowed for most contributions of clothing and household items unless the donated property is in good used condition or better.

6 comments:

Phyllis said...

I use the 1040EZ form. My house is paid for and I have no deductions. I am single so I got to claim $8,450.00
I am getting $1,566.00 back.
No, let me rephrase that...My credit card company is getting $1,566.00!!

Andie Pandie said...

All that just went right over my head. Maybe I should have Mr. AP look at it. LOL

Andy Land said...

Translation: You still shell out about 30% of your money to the IRS.

jazzi said...

Thanks for the info. I'm figuring we'll still use the same tax person we did last year until we no longer have any pastor income. But, since we only had it for 2 months of the year, it should be pretty easy. Not to mention NO income for 2 months.

Special K said...

Holy frigging shit, but you made my head hurt.

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