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Tax Breaks Extended

President Bush signed the bill into law on December 20, 2006. The law retroactively reinstates a number of tax breaks that had expired at the end of 2005, making them effective for 2006 and 2007. Here's a brief overview of what was extended.

The itemized deduction for state and local sales tax was reinstated for 2006 and 2007. This is a boon for taxpayers in states without a state income tax, but taxpayers who pay both state sales and income taxes can deduct whichever is higher.
Middle-income taxpayers can claim a deduction for up to $4,000 of qualifying higher education expenses for 2006 and 2007. This is an above-the-line deduction so you don't need to itemize to claim it. However, income limits apply.
Teachers can claim a deduction for classroom supplies that they pay for out of their own pocket. This is also an above-the-line deduction, with a limit of $250.
The law also extends a number of business tax credits and deductions, including the research credit, the work opportunity and welfare-to-work credits, and the 15-year recovery period for certain leasehold and restaurant improvements.
The Energy Tax Incentives Act of 2005 provided several tax credits and deductions intended to promote energy conservation. The new lay extended certain ones through 2008.
The law makes other miscellaneous changes to the tax code. For more information, give us a call.

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