New Tax Bill at a Glance
May 10, 2006
Courtesy of the Associated Press, here’s a handy summary of the major provisions in the new $70 billion tax reconciliation bill likely to become law soon:
Investment IncomeWould extend for two years, from 2009 through the end of 2010, a maximum tax of 15 percent on capital gains and dividend income.
Alternative Minimum TaxWould extend for one year, through 2006, AMT exemptions for upper middle-income taxpayers. Ensures the AMT doesn’t erode eligibility for several tax credits, including the dependent care credit.
Small Business InvestmentExtends two years, through the end of 2009, a tax cut letting small businesses write off up to $100,000 in investments in equipment and other depreciable assets.
Roth IRAsEliminates, for 2010, the $100,000 income limitations on converting traditional retirement accounts to Roth IRAs. Money shifted to Roth IRAs would be taxed when converted, raising funds in the short term, but would be withdrawn tax-free at retirement at a significant long-term revenue loss.
Unearned Minor IncomeIncreases the age, from 14 to 18, in which non-wage income for most minors is taxed as if it were the parent’s income.
Overseas Corporate IncomeRepeals a 2004 tax provision that “grandfathered” certain overseas contracts, allowing companies with those contracts to receive some of the manufacturing tax benefit. The European Union calls this an illegal U.S. trade subsidy and has threatened trade sanctions on the U.S. in retaliation.