2006 Tax
Relief And
Healthcare Act
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Personal
Tax |
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Now that the election cycle is finally over, Congress has acted to extend a significant number of tax breaks that have been held up due to partisan wrangling.
The 2006 Tax Relief and Healthcare Act also provides for some tax changes
taking effect in 2007. All of the tax breaks - such as the deduction for college tuition and sales taxes - were due to expire in 2005 and would have cost taxpayers $38 billion in 2006 if they had not been extended. The unfortunate part of the story however, is that the IRS has already printed 2006 tax forms and publications so you (and especially WE) will have to proceed cautiously when relying on IRS documents that will now have to be amended to include the following provisions: |
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Sales Tax Deduction Congress recently enacted a "fairness" provision that allowed people to deduct the greater of their state and local income taxes or their estimated sales taxes paid. Since nine states do not have a state income tax, this was a significant deduction for residents of those states. This week's legislation extended this provision. Tuition Deduction The tuition deduction has been extended. If your adjusted gross income does not exceed $65,000 ($130,000 joint), you can deduct up to $4,000 of qualified tuition payments and fees. $250 Teacher Deduction Congress extended the special tax break it had earlier given to teachers that allow them to deduct up to $250 annually for expenses paid for books, supplies and supplementary materials without itemizing. Any amount paid over the $250 can still be deducted as a miscellaneous itemized deduction subject to reduction by 2% of your adjusted gross income. Tax Credit Extensions The research and development (R&D), work-opportunity and welfare-to-work credits have also been extended. Health Savings Accounts Congress has increased the tax-free contribution limits for health savings accounts for 2007. Health savings accounts allow taxpayers to enroll in a catastrophic-healthcare plan with low premiums and save money tax-free toward future health-care expenses. The tax-free contribution limits will rise from $2,700 to $2,850 for single filers in 2007 and from $5,450 to $5,650 for joint filers. Mortgage Insurance Deduction Beginning in 2007, taxpayers who itemize their deductions will be able to deduct mortgage insurance premiums on insurance contracts entered into in 2007 in addition to their mortgage interest. Mortgage insurance is typically required by mortgage lenders when a borrower finances more than 80% of their home purchase. This new premium deduction will only be available to taxpayers with adjusted gross income of less than $110,000 ($55,000 for married filing separate).
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