Tax Bill Agreement Possible - Will It Help Us? May 10, 2006
Tax writers in Washington D.C. reached an agreement that would extend lower rates for investors and shield middle class (see entry on economic classes) taxpayers from the alternative minimum tax (AMT) for another year.
Here are the highlights:
- Extend a 15% tax rate on capital gains and corporate dividends until 2010. The rate was otherwise set to expire at the end of 2008. When the rate expires, the rate for most capital gains would return to 20%, while corporate dividends would be taxed at personal income-tax rates, which top out at 35%
- Lawmakers will increase for tax year 2006 the AMT income exemption levels that were in effect for 2005. The new exemption levels will be $42,500 for single filers (up from $40,450) and $62,550 joint filers (up from $58,000).
- The most controversial is one allowing all taxpayers, not just those with modified adjusted gross income of $100,000 or less, to convert their traditional IRAs to Roth IRAs.
With high earning taxpayers being allowed to convert their IRAs to Roth IRAs, the gains earned in those accounts would grow tax free, whereas in a traditional IRA they would have been taxed as income upon withdrawal. This will probably create some initial revenue for the government as people convert IRAs to Roth IRAs.
Source:
House GOP ready with $70B tax cut
By William L. Watts, MarketWatch