The Senate couldn’t pass a complete repeal of the estate tax. While there are enough votes to pass something, but isn’t going to be a complete wipe-out of the program — despite the fact that less than 2 percent of the Americans who die each year leave an estate large enough to pay something in estate tax.
The Tax Increase Prevention and Reconciliation Act of 2005 is going into effect now. Here are a few of the highlights, courtesy of FGMK, an accounting firm based in Bannockburn, IL (www.fgmk.net).
There are $90 Billion in targeted benefits and $20 Billion in revenue raisers. In other words, this act is going to put the US another $70 Billion in the hole.
The Act extends and increases (for 2006 only) the AMT exemption amount for individuals. For the tax year 2006 (due on April 15, 2007), the AMT exemption amount for married couples filing jointly is $62,550 and for single taxpayers is $42,500. In addition, the Act lessens the sting of AMT by allowing the use of certain nonrefundable personal credits. Nonrefundable personal credits include the dependent care credit, the credit for the elderly and disabled, the credit for interest on certain home mortgages, the Hope credit for certain college expenses and the Lifetime Learning credit.
The Act extends the dividend and capital gains rate cuts for two more years through 2010.
The Act extends the enhanced small business expense thresholds (code Section 179) in the American Jobs Creation Act of 2004 through December 31, 2009. For 2006, the amounts are $108,000 and $430,000.
The Act raises the age limit for the so-called “kiddie tax” from 14 to under 18.
Roth IRAs: The Act eliminates the $100,000 adjusted gross income ceiling for converting a traditional IRA to a Roth IRA, for tax years after 2009. Taxpayers who convert in 2010 can elect to recognize the conversion income in 2010 or average it over the next two years. (This could be a boon for individuals, especially if in those years, you have a especially low income year. Otherwise, you’ll be paying out at the highest income tax bracket rate, but then the cash will grow tax-free forever.)
June 8, 2006.