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The following links are provided for your convenience:
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2006 and 2007 Tax News:
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- In 2007, individuals under age 50 may invest $15,500 in a 401(k) or 403(b) plan (up from $15,000 in 2006). For those 50 years or older, the Catch-Up Contribution Limit remains $5,000 for a total of $20,500. Maximum SIMPLE contributions increased to $10,500 (up from $10,000), while the SIMPLE Catch-Up Deferral remains $2,500.
- On January 1, 2006, the "ROTH" 401(k)/403(b) retirement plan became available which, as currently planned, will be available for five years. Anyone, regardless of income level, is permitted to fund these plans with the same amount as "traditional" 401(k) plans. As with a Roth IRA, the equivalent of a tax deduction is forfeited at the time of funding and any future gain would be tax free income upon withdrawal.
- AMT Eexemption Increased for One Year: For tax year 2006, the alternative minimum tax exemption rose to $62,500 for a married couple filing a joint return, up from $58,000 in 2005 and to $42,500 for singles and heads of household, up from $40,250. Under current law, these exemption amounts will drop to $45,000 and $33,750, respectively, in 2007.
- The federal estate tax exemption remains $2 million through 2008.
- Standard Mileage Rates Adjusted for 2006: The standard mileage rate for business use of a car, van, pick-up or panel truck is 44.5 cents a mile. The standard mileage rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 18 cents a mile. For using a car to provide charitable services solely related to Hurricane Katrina, the standard mileage rate is 32 cents a mile. Otherwise, the rate for providing services to charitable organizations remains at 14 cents a mile.
- New Rules for Giving to Charity: To be deductible, clothing and household items donated to charity after August 17, 2006, must be in good condition or better. However, a taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return. To deduct any charitable donation of money, taxpayers must have a bank record or a written communication from the recipient showing the name of the organization and the date and amount of the contribution. For taxpayers that file returns on a calendar-year basis, including most individuals, the new provision applies to contributions made beginning in 2007.
- An IRA holder, age 70 1/2 or over, can directly transfer tax-free, up to $100,000 per year to an eligible charity. This option is available in tax years 2006 and 2007. Eligible IRA holders can take advantage of this provision, regardless of whether they itemize their deductions. Funds must be contributed directly by the IRA trustee to the eligible charity. Transferred amounts are counted in determining whether the holder has met the IRA's required minimum distribution rules.
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CLAY, MILLIAS & CO., LLP
610 West Fifth Street
Antioch, California 94509
(925) 757-4808 / FAX (925) 757-4994
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