The word “taxes” has a negative affect on people. It makes us look away, it upsets us and we make lots of grunting noises. But that?s looking at the previous year and preparing for the tax season. What about planning for 2006? Can we actually plan ahead for taxes?
Yes, it is possible. It?s important to begin our discussion on taxes by knowing what tax changes are taking affect. So I?d thought I?d get you started in the right direction. Here are some of the tax benefits coming your way in 2006 for your 2007 filings.
- Standard Deduction will increase to $10,300 for married couples filing jointly, $5,150 for singles and $7,550 for heads of household.
- Save more money with retirement contributions into your 401(k) or 403(b). Limits have been increased to $15,000. If you are at least age 50 before the end of 2006, you can now contribute an additional $5,000. Every little bit helps.
- Estate and Gift Tax are certainly getting a gift. The exception amount increases to $2M and the maximum marginal tax rates dropped 1% to 46%.
- Hybrid cars are the new ?in? thing and you?ll get rewarded for it too. But buy it fast to get your $2,400 tax credit. It?s only good for the first 60,000 vehicles per manufacturer.
- Income Limits Increase for Deductible IRA’s. Although regular IRA and Roth contributions limit of $4,000 haven?t changed, people age 50 or older can put in another $1,000 for a total of $5,000 for the year.
- Child Tax Credit will remain at $1,000 per each qualifying child. Better something than nothing.
?You can put a little bigger bow on the Gift Tax Annual Exclusion package. You can now give an extra $1,000 or $12,000 for the year without filing a gift tax return.
- And a little something for you. Personal exceptions have increased from $3,200 to $3,300 for the year.
So now you have it. Tax benefits that you can count on for 2006. Plan ahead and put that little extra away for those later years. When you?re retired, you can finally look behind and thank yourself for planning ahead.
John Michalak is a well-known local authority and financial educator in the matters of retirement finances. He assists retirees