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New Tax Provisions for 2006

Roy Lewis
May 12, 2006

Tax planning should be a year-round process. The earlier you begin to plan for your 2006 taxes, the better off you'll be. But in order to complete your planning, you'll need to know which provisions are no longer in the tax code for 2006 -- I wrote about those last week -- and which new ones are phasing in. Here's some good news about provisions that will actually save you tax dollars in 2006.

Increased retirement contribution limits
In 2006, the maximum 401(k) and 403(b) employee contribution increases to $15,000. In addition, taxpayers who are at least age 50 before the end of 2006 can increase their catch-up contribution limits by the following amounts for the following plans:

  • An additional $5,000 for 401(k), 403(b), salary-reduction SEP plans, and 457 plans.
  • An additional $2,500 for SIMPLE plans.
  • An additional $1,000 for both traditional and Roth IRAs.

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