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2006
Tax Act
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2006 |
2007 |
Single |
$5,150 |
$5,350 |
Married, filing joint |
$10,300 |
$10,700 |
Married, filing
separate |
$5,150 |
$5,350 |
Head of Household |
$7,550 |
$7,850 |
65 or older or Blind |
$1,300 - Single, HOH |
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$1050 - MFJ (each) |
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Personal and Dependency
Exemption: |
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$3,300 |
$3,400 |
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The Working Families Tax Relief
Act of 2004 extended "the marriage tax penalty" relief for many
taxpayers. Through 2010, the basic standard deduction for joint
returns is twice the single standard deduction.
In addition, the married filing
jointly 10% and 15% rate brackets will be twice the 10% and 15%
rate brackets for single filers. This extension partially alleviates
the marriage penalty but does not eliminate it.
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For 2006, the amount used to reduce
the net unearned income reported on the child's return that is
subject to the "kiddie tax," is $850. This amount is
the same as the $ 850 standard deduction amount.
First $850 |
Not Taxed |
Next $850 |
Taxed at child's rate |
Income greater than $1,700 in
2006. Taxed at parent's highest bracket until the child reaches
age 18.
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For 2006, the maximum credit you
can claim is $1,000 for each qualifying child under age 17. (After
2011, up to $500 only) The credit is phased out beginning at modified
AGI levels of $110,000-MFJ ($75,000-HOH, $55,000-MFS).
The qualifications for claiming
the additional child tax credit have been expanded to include
taxpayers with 1 or more qualifying children when the taxpayer
is not able to claim the full child tax credit for each child.
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For year 2006, the maximum amount
of eligible day care expenses paid for dependent(s) under age
13 of working couples is $3,000, if there is one qualifying child
($6,000, if there are 2 or more) and the maximum credit is 35%.
The phase-down of the credit begins
as income rises to a maximum credit percentage of 20% after income
exceeds $43,000.
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You may be able to deduct 100%
of the amount paid for medical and dental insurance and qualified
long-term care insurance from your trade and business income,
if you are self-employed.
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Capital gains rates fall from
20% to15% for higher income earners for qualifying property sold
between May 6, 2003 through December 31, 2007.
For lower income taxpayers, the
current 10% rate falls to 5%. In 2008, there will be a zero percent
capital gains for lower income taxpayers. Then, on January 1,
2010, the sunset provisions spring to life (maybe) and capital
gains taxes will increase to prior levels.
The big difference between the
highest tax rate of 35% and the highest capital gains rate of
15% makes tax planning even more important. The five-year
holding period created by EGTRRA is effectively repealed.
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