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Tuesday, December 12, 2006

NEW TAX BILL ON ITS WAY

The Tax Relief and Health Care Act of 2006 has passed both the U.S. House of Representatives and the U.S. Senate, and it is expected that President Bush will sign it into law. Perhaps a better name would be the Tax Break Bill of 2006, with most of the provisions relating to reinstatement of tax breaks that expired at the end of 2005, and further extensions and modifications of other tax breaks. The following is a list of some of the major provisions:

-The optional itemized deduction for state and local sales and uses taxes is extended through 2007;

-The above-the-line deduction for expenses of educators is extended through 2007;

-Charitable remainder trusts that earn unrelated business income will no longer lose their exempt status, but must pay a 100% excise tax on such unrelated business income;

-The above-the-line deduction for higher education expenses is extended through 2007;

-The 15-year straight line writeoff (instead of straight-line 39 year writeoff) for qualified leasehold improvements and qualified restaurant improvements is extended for 2 years;

-Some of the rules relating to Health Savings Accounts have been liberalized;

-The Tax Court is given authority to review equitable innocent spouse relief (written about previously);
-The research expense credit is extended for two years and modified for 2007;

-The work opportunity tax credit, relating to the hiring of members of certain target groups, are extended and modified;

-Various District of Columbia tax breaks are extended for two years;

-The new markets tax credit, relating to qualified equity investments to acquire stock in a community development entity is extended for one year and modified.

There are many more provisions, including a number energy credits, but are generally of narrow interest to small groups of taxpayers.
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