There were a number of tax law changes last year that will affect businesses and individuals this year and beyond. Some of these changes may impact your 2006 tax preparation, along with your future investment and tax planning. Keeping up to date on the constant changes in our tax law is a full time job. However, knowing about some of the changes could make a difference in your personal tax returns.

The Tax Relief and Health Care Act of 2006 and the Tax Increase Prevention and Reconciliation Act have extended tax breaks that were scheduled to expire at the end of 2005. Tax breaks affected by the plan include:

The Tuition Deduction of up to $4,000 (depending on your income level) for tuition and fees paid for higher education has been extended and can still be deducted in 2006 and 2007.

The State and Local Sales Tax Deduction was extended for 2006 and 2007. This extension will benefit those who are filing a Schedule A for itemized deductions. This deduction will only provide a benefit if your total itemized deductions exceed the standard deduction of $10,300 for married couples filing jointly, $7,550 filing head of household, and $5,150 married filing separate.

For teachers who subsidize their classroom supplies, you can still take the $250 in Teach Classroom Expenses for 2006 and 2007.

The current low tax rate of 15 percent on capital gains and qualified dividends, previously set to expire at the end of 2008, is now extended through 2010.

The higher exemption amount for the individual AMT (alternative minimum tax), expired at the end of 2005, is extended through 2006 and increased slightly. Originally, the AMT was put into law to nab upper income filers who claimed lots of tax breaks by establishing a minimum tax rate of 26 percent. However, this has changed, now that over 3.5 million taxpayers are projected to pay the AMT in 2006.

The current “Section 179” asset depreciation deduction for business machinery and equipment was scheduled to be reduced in 2008. The Act extends the higher deduction through 2009.

Finally, a change that some may not consider so good: Children under age 18, who have investment income above $1,700, will have to pay taxes at their parents’ rate; this is called the kiddie tax. Additionally, the kiddie tax law change is retroactive to the beginning of 2006, so a sale or gift made earlier in 2006 may have generated an unexpected tax increase that calls for new or increased estimated tax payments. Previously, the kiddie tax affected only children under age 14.

As with all tax questions and issues, ask your accountant or financial specialist about the changes that could affect your 2006 tax return and your 2007 tax planning. Remember, they are the professionals that do this full-time!