New Tax Laws for 2006 Filings
Two tax bills passed last year, bringing tax relief and new tax burdens for entrepreneurs. Here's a brief guide from Steve Fishman, author of Lower Taxes in 7 Easy Steps.
Higher retirement contribution limits: The 401(k) and 403(b) plan contribution limits increase from $1,000 to $15,000. For those over 50, catch-up contributions also rise from $1,000, to $5,000.
AMT deductions disappear: In 2007, child-care payments and mortgage interest are among items that can no longer be deducted from gross income when calculating whether you must pay the (usually higher) Alternative Minimum Tax.
High earners get more deductions: There's tax relief for singles earning more than $150,000 and married couples earning $225,000-plus. The rate at which itemized deductions are phased out for high earners has been cut by one-third for '06 and '07.
Energy-efficient cars: Last year's $2,000 Clean Fuel Deduction has been replaced by a tax credit that varies depending on the car model you buy. Each carmaker can only sell 60,000 fuel-efficient cars before a yearlong phaseout of the deduction begins.
Expired-deduction department: As of September, both the state sales tax deduction and the research and experimentation credit were not renewed. Some legislators are trying to reinstate these for '06 filings, so stay tuned.
Seattle writer Carol Tice reports on business and finance for The Seattle Times, Seattle Magazine and other leading publications.