Here's a quick look at what the House-passed tax bill includes. And what it doesn't include.
The Senate is debating the measure as I type and is expected to approve it later today. Some reports, however, say the vote could be close. We'll see.
After it's actually law -- I hate to count tax chickens before lawmakers finish laying golden or rotten eggs -- I'll examine these provisions in more detail.
Among the winners, so far, are:
Investors, who will see their capital gains and qualified dividends continue to be taxed at the 15 and 5 percent rates through the end of 2010.
Alternative minimum tax potential victims, who have been granted a
larger income exemption amount for 2006. The bill also offers these
taxpayers protection from the AMT if they also claim several popular
tax credits, such as the dependent care and education credits.
Songwriters, who now can consider the income they receive for
"self-created musical works" (don't you love legislative language?) as
capital gains income instead of higher-taxed ordinary income. I wrote
about this provision a couple of months ago here.
Small business owners, who can continue through 2009 to expense up to
$100,000 spent on certain assets in one tax year, rather than
depreciate the purchases over several.
Immediate losers, but long-term winners, are higher-income earners with individual retirement accounts. Previously, if you made more than $100,000 you couldn't convert your traditional IRA, upon which you'd have to eventually pay taxes on withdrawals, to a Roth account, which offers tax-free distributions. That earning limit is repealed.
Those who convert lose upfront because they'll owe taxes on the amounts moved to a Roth. But they are winners when they get access to that money in retirement without handing over any more to Uncle Sam, who becomes the big loser.
Other tax bill losers include individuals making an offer-in-compromise to the IRS to wipe out their tax debts. (This payment option is discussed in this story.) These folks no longer can postpone the inevitable while they wait for an IRS ruling on their request. Instead, they'll now have to make a partial payment of their proposed settlement offer while the IRS is reviewing the case.
And young investors, who previously were allowed to pay tax on their
investment income at their usually lower tax-bracket rates now will
find that until they turn 18, their earnings will be taxed at the same
level as their parents. This change to the so-called "kiddie tax"
(details here on this tax as it worked under the old rules; just change
age 14 to 18) is expected to raise more than $2 billion over 10 years.
Meanwhile, millions of us are waiting to see how much we'll win or lose in the expected "trailer" tax bill:
-- Residents who for the last few years have been deducting sales tax payments;
-- Teachers who wrote off their out of pocket purchases of classroom supplies;
-- Students or their parents who claimed the tuition and fees deduction; and
-- Donors who are hopeful that a variety of charitable contribution deductions make it into law.