question.jpgIn Federal Income Tax

What changes or additions have been made for the 2006 tax year?

There have been quite a few changes to the tax rules and laws that will apply to your 2006 return. This is a list of most of the changes and additions, including the ones most likely to affect you. But it’s not an exhaustive list so, as always, you should check out the official IRS documents, or confer with an accountant or tax attorney, before finalizing your tax return:

1. The due date for tax returns was bumped up to April 17, 2007.

2. The tax rate brackets for 2006 have changed to account for inflation, so you should consult the instructions that come with Form 1040 to calculate your new tax rate.

3. For those not itemizing their deductions, the standard deduction has increased.

4. There is a one-time tax credit for payments of the federal telephone excise tax.

5. The amount of the earned income credit has increased.

6. The phaseout limits for the earned income credit (that is, the income level at which you can no longer claim the credit) have changed.

7. The income limits for the Hope and Lifetime Learning credits have increased.

8. The maximum amount you can claim for the Hope credit has increased.

9. The amount you can claim for a personal exemption has increased.

10. The application of the phaseout for personal exemptions has changed.

11. The 3% reduction for itemized deductions has changed to a 2% reduction.

12. The exemption for the alternative minimum tax has increased.

13. The standard mileage rate for business use of your vehicle has been increased.

14. There has been a slight change to what clothing and household items, donated to charity, you can deduct.

15. There has been a slight increase in the minimum earned income used in calculating the additional child tax credit.

16. There is a new alternative motor vehicle credit.

17. The maximum amount of the qualified electric vehicle credit was lowered.

18. Two new residential energy credits have been created: the nonbusiness energy property credit and the residential energy efficient property credit.

19. With the Gulf Opportunity Zone and Katrina Emergency Tax Relief Acts of 2005, Congress provided additional tax relief for victims of hurricanes Katrina, Rita and Wilma – you should consult IRS Publication 4492 for more information.