2006 Tax Law Changes

Alternative Minimum Tax exemption rises in 2006

This helps taxpayers who might have too many deductions. But unless Congress acts, the exemptions could fall in 2007, raising taxes for thousands of taxpayers.

In 2005, Congress did families a favor and expanded the exemptions on the Alternative Minimum Tax for 2005 and 2006.

The AMT is a parallel tax system that can take away some breaks and potentially saddle taxpayers with huge bills.

To reduce the number of taxpayers getting hit by the tax, Congress has expanded the income levels under which the tax cannot be applied.

For 2006, the AMT exemption on a joint return will rise to:

  • Married couples filing jointly: $62,550 ($31,275 for married couples filing separately). That's up from $58,000 in 2005 -- or $29,000 for married couples filing separately.

  • Singles and heads of households: $42,500. Up from $40,500 in 2005.

What happens in 2007? That depends on Congress.

Unless Congress acts, the tax could hit 23 million taxpayers because the exemptions listed above will fall. That's up from around 5 million in 2005.

Here are the numbers:

  • Married couples filing jointly: $45,000 ($22,500 for married couples filing separately).

  • Singles and heads of households: $33,750.

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