Tax Law Changes for 2006

Gift Tax
The gift tax annual exclusion amount rose from $11,000 to $12,000 per person per year. The gift tax exclusion equivalent remains at $1 million and the gift tax unified credit remains at $345,800.

Estate Tax
The estate tax exclusion equivalent rose from $1.5 million to $2 million per person. Accordingly, the unified credit increased from $555,800 to $780,000. The maximum estate tax rate declined from 47 percent to 46 percent.

Generation Skipping Transfer (GST) Tax
The GST tax exemption continues to match the estate tax exclusion equivalent. Accordingly, it rose to $2 million, and the maximum tax rate is 46 percent.

401(k) and 403(b) Employee Deferral Limits

Under age 50 $15,000
Age 50 or older $20,000

The total limit of employer and employee contributions under IRC section 415 is $44,000.

New Roth 401(k)
As of Jan. 1, a new retirement plan called the Roth 401(k) is available. It has similar features to a 401(k) but is funded with after-tax contributions and if the withdrawals are "qualified," they are income tax-free to the participant. Contribution limits are the same as the 401(k) limits noted above. Under EGTRRA this plan is only available through the end of 2010 when the provision sunsets.


The information on this site is not intended as legal, tax or investment advice. For such advice, please consult an attorney, tax professional or investment professional.

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