2006 AMT Exemption Amounts for Individuals Increased.
The computation of alternative minimum tax (AMT) starts with regular taxable income and we then modify it with various adjustments and tax preferences and then subtract an exemption amount.  The result is alternative minimum taxable income upon which AMT is calculated.  The AMT applies if it is greater than your regular income tax.   Without new legislation the exemption was to revert to the exemption amount for the year 2000.  The new law does away with the scheduled decrease in the exemption and provides for increased maximum exemption for 2006 only.  The increase in maximum exemption for 2006 is $4,550 for married taxpayers filing a joint return and by $2,250 for unmarried individuals. 

Maximum AMT Exemption             2000               2005               2006
Married Filing Jointly                       $45,000          $58,000          $62,550
Unmarried Individuals                       $33,750          $40,250          $42,500

Under prior law the current lower tax rates for long term capital gains and qualified dividends was to expire after 2008.  The Act extends the rates through 2010. 

A child subject to kiddie tax pays tax at his or her parents’ highest marginal rate on the child’s unearned income over $1,700 (for 2006) if that tax is higher than the tax the child would otherwise pay.  Under pre-Act law, a child is subject to the kiddie tax if the child has not attained age 14 before the close of the year.  Under the new law, a child is subject to the kiddie tax if the child has not attained the age of 18 by the end of the year.

Income limit on Roth Conversions eliminated, beginning in 2010.

The act extends the $100,000 expense election limit and the $400,000 phase out ceiling.  Both of these amounts are adjusted annually for inflation.  The amount for 2006 is $108,000.  The new law extends the larger amounts 2 years through 2009.