Electric and Clean-Fuel Vehicles

For 2006, the list of vehicles that are qualified hybrid vehicles for the Alternative Motor Vehicle Credit has been expanded. The tax credit for hybrid vehicles applies for vehicles purchased on or after January 1, 2006, and could be as much as $3,400 for those who purchase the most fuel-efficient vehicles.

Exemption Amount Increased

The amount you can deduct for each exemption has increased from $3,200 in 2005 to $3,300 in 2006.

You lose all or part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2006, the phaseout begins at:

• $112,875 for married persons filing separately,
• $150,500 for single individuals,
• $188,150 for heads of household, and
• $225,750 for married persons filing jointly or qualifying widow(er)s.

If your adjusted gross income is above the amount for your filing status, use the Deduction for Exemptions Worksheet in the Form 1040 instructions to figure the amount you can deduct for exemptions.

Social Security and Medicare Taxes

For 2006, the employer and employee will continue to pay:

1. 6.2% each for social security tax (old-age, survivors, and disability insurance), and
2. 1.45% each for Medicare tax (hospital insurance).
> For social security tax, the maximum amount of 2006 wages subject to the tax has increased from $90,000 to $94,200. For Medicare tax, all covered 2006 wages are subject to the tax.

 

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Standard Deduction Amount Increased

The standard deduction for taxpayers who do not itemize deductions on Schedule A of Form 1040 is, in most cases, higher for 2006 than it was for 2005. The amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer.

The basic standard deduction amounts for 2006 are:

• Head of household — $7,550
• Married taxpayers filing jointly and qualifying widow(er)s — $10,300
• Married taxpayers filing separately — $5,150
• Single — $5,150

The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $850 or the sum of $300 and the individual's earned income.

 

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Standard Mileage Rates

For tax years beginning in 2006, the allowable deductions for the standard mileage rate are as follows:

• Business miles. The standard mileage rate for the cost of operating your car changes to 44.5 cents a mile for all business miles driven.
• Charitable services. The standard mileage rate allowed for use of your car when you use your car to provide charitable services to a charitable organization is 14 cents a mile.
• Charitable services — Hurricane Katrina relief services. If you used your vehicle in giving services to a charitable organization to provide relief related to Hurricane Katrina, the standard mileage rate allowed for use of your car is 32 cents a mile.
• Medical reasons. The standard mileage rate allowed for use of your car for medical reasons is 18 cents a mile.
• Moving. The standard mileage rate for determining moving expenses is 18 cents a mile.

 

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2006 Federal Income Tax Rate Schedules

The 2006 tax rate schedules are provided so that you can compute your estimated tax for 2006.