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India Currents gave me a voice in days I was very lost. Having my articles selected for publishing was very validating – Shailaja Dixit, Executive Director, Narika, Fremont

The Tax Increase Prevention and Reconciliation Act of 2005 was signed into law May 17, 2006. For taxpayers above the 15 percent tax bracket, long-term capital gains will be taxed at 15 percent through 2010. For others, capital gains will be taxed at 5 percent through 2007 but then dropped to zero through 2010. Also, the Act increases the age to which a child’s unearned income is taxed at the parent’s rate from under 14 to under 18. This tax provision for minors is effective for 2006. Pension Act Provision: Many taxpayers take charitable deduction for used clothing and household goods. Now the deduction will be allowed only if those items are “in good used condition or better.” This provision is effective immediately. However, this limitation does not apply to items supported by an appraisal. Limits on Deduction on Cash Gifts: Any gift of money may be deducted only if supported by a bank record or a written acknowledgement from the charitable organization. This will have the effect of disallowing a deduction for small gifts of cash and is effective for the next year. Year-End Tax Planning: The first step is to gather tax info and project your tax situation. Review if you have you paid enough taxes to avoid an underpayment penalty. Deferring Income to 2007: Deferring income will be advantageous so long as the deferral does not bump your income to the next bracket. Delay billing, if you are self-employed. Deferring year-end bonuses will defer income to next year. Deduction Planning: For the cash-method taxpayer, an expense is only deductible in the year in which it is actually paid. Mail checks before the end of the year. But if you pay by credit card in 2006, you can take the deduction even though you won’t pay your credit card bill until 2007. State Taxes: If you anticipate a state income tax liability for 2006 and plan to make an estimated payment, consider making the payment before the end of 2006. BUSINESS DEDUCTIONS Self-Employed Health Insurance Premiums: Self-employed individuals are allowed to claim 100 percent of the amount paid as above-the-line deduction, without regard to the 7.5 percent of AGI floor. Equipment Purchases: If you are in business and purchase equipment, you may make a “Section 179 Election,” which allows you to expense otherwise depreciable business property. In general, you may elect to expense up to $108,000 of equipment if the asset was placed in service during 2006. Alternative Motor Vehicle Credit: For the first time in 2006, a credit is available for purchases of motor vehicles powered by certain alternative fuels. It is available for vehicles placed in service on or after Jan. 1, 2006. The dollar amount depends on fuel savings and weight of the vehicle. Hybrids are the most popular vehicles subject to the credit. Annual Gift Tax Exclusion: Use of annual gift tax exclusion of $12,000 per year per person to reduce estate and gift tax should be considered. Alternative Minimum Tax: Some of the standard year-end planning ideas will not reduce tax liability if you are subject to the alternative minimum tax (AMT). Parveen Maheshwari, C.P.A., has an office in Burlingame. (650) 340-1400.