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STATE AND LOCAL SALES TAXES NO LONGER DEDUCTIBLE
Unless extended, the option for individuals to deduct state and local sales taxes is no longer available after 2005.
INCREASED CATCH-UP CONTRIBUTION
For 2006, the maximum IRA contribution stays at $4,000 but the over-50 catch-up contribution increases from $500 to $1,000. The SIMPLE plan catch-up amount for taxpayers age 50 or over by the end of the tax year, subject to certain limitations, increases from $2,000 in 2005 to $2,500 in 2006.
ROTH 401(k)S AVAILABLE
Beginning in 2006, a 401(k) plan may include a qualified Roth contributions program. Under the Roth 401(k) option, a participant can elect to have all or a portion of the participant’s elective deferral (called designated Roth contributions) included in income when earned. Designated Roth contributions are treated in a manner similar to those of a Roth IRA; qualified distributions of these contributions, and income on them, are not included in income.
ENERGY TAX CREDITS
Beginning in 2006, two new residential energy credits are available courtesy of the Energy Policy Act of 2005 – the non-business energy property credit and the residential energy efficient property credit. The credits are available for the following types of energy-efficient property:
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exterior doors;
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heat pumps;
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water heaters;
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central air conditioners;
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furnace or hot water boilers;
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fans used in natural gas, propane, or oil furnaces;
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insulation material or an insulation system specifically and primarily designed to reduce the heat gain of a dwelling unit;
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exterior windows (including skylights);
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qualified property for producing solar electricity;
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qualified solar water heating property; and
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qualified fuel cell property.
Condominium and cooperative owners also may be able to take advantage of the credit on a pro rate basis for repairs made by a condominium association or cooperative corporation.
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