Articles

Forms

Federal Tax Links

State Tax Links

Holiday Tax Update - 2006

Added on 12/11/2006

FROM PENNSYLVANIA …

Pennsylvania had several changes to be aware of in 2007.  The increased eligibility income limits for the PA Property Tax Rebate program continue for 2007.  Taxpayers with an eligibility income up to $35,000 may be eligible.  The income level for the rent rebate was not increased.  The age and other existing requirements are also unchanged.  PA has also had an important law change for corporations.  Beginning January 1, 2007, a federal “S” corporation is automatically recognized as a PA “S” corporation.  A separate election form is no longer required for PA.  If a Federal “S” corporation does not want to be a PA “S” corporation, then it must elect out.  Beginning in 2008 PA will send any tax assessments over $300 by certified mail.  Finally, PA is requesting that

Taxpayers verify their school district codes reported on the PA-40

HIGHLIGHTS OF THE TAX LAWS:
 

1. CHILD TAX CREDIT:
The child tax credit is $1,000 for 2006. If you are eligible the amount will be claimed on the 2006 tax return. The $1,000 credit has been extended until 2010.
 

2. MARRIAGE PENALTY RELIEF:
The basic standard deduction for a married couple filing a joint return is double the single standard deduction. The end of the 15% tax bracket for joint returns is twice that for single filers. These provisions are for 2004 to 2010.
 

3. INCREASED 10% TAX BRACKET:
For 2006 the 10% Tax Bracket is increased to $15,100 of taxable income for joint filers and $7,550 for single filers. The 10% bracket for head of household is $10,750.
 

4. REDUCTION IN RATES:
The tax rates above 15% are 25%, 28%, 33%, and 35%.
 

5. DEPRECIATION CHANGES:
The limit on Section 179 expense has been increased to $108,000 for federal only.

6. CASUALTY LOSSES:
Due to the weather problems PA experienced this year, you may have a casualty loss. A casualty loss is allowed as an itemized deduction on Schedule A. The calculation of the deductions is complex and there are limitations based on your adjusted gross income. If you believe you have a casualty loss, your preparer will need some basic information. The information includes what was damaged, the cost of the property, fair market value before the damage and any insurance proceeds. If you have any questions on casualty losses, please call our office.

7.DOMESTIC PRODUCTION ACTIVITY:
The domestic production activity deduction is once again available in 2006. If you are in a specific business in the USA and pay wages, you may be eligible for the Domestic Production Activity Deduction. Some of the eligible businesses include manufacturing, growing, construction, engineering & mining.

8. ENERGY CREDITS.
There are several energy credits that are available in 2006. The first two are a credit for energy saving home repairs and installing alternative energy equipment. To claim the credits for this year the work must be done in 2006. There are also several credits for business including a credit for energy efficient commercial buildings. Finally there are credits for purchasing a hybrid or lean burn vehicle. Please check with your preparer for the amounts and limits on the credits.