Free Bill of Sale Form Illinois

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					Income Tax Update
Illinois Association of Aggregate Producers
                May 18, 2006

    •Presented by Eck, Schafer & Punke, LLP
Canned Opening Gibberish …

• Make eye contact.
• Establish relevancy of topic to audience.
• Get audience involvement.
• Use humor as appropriate.
 Tax Increase Prevention Act

• Signed into law May 2006.
• 70 billion in “net” tax cuts.
• “Trailer bill” still to come.
Alternative Minimum Tax

• Separate tax
  calculation.
• Eliminates benefit of
  many itemized
  deductions.
 Should be called
  “Mandatory
  Maximum Tax”
Alternative Minimum Tax

• Taxpayer required to
  pay the higher of
  “AMT” or regular tax
  calculation.
• Effects Millions.
Alternative Minimum Tax

• Exemption bumped
  to $62,550 if married.
• $42,500 if single.
• For 2006 only.
• Will keep 15 million
  from paying “AMT”.
Dividend & Capital Gain Rate Cuts


 15% and 5% rates extended.
 For 2 years.
 Through 2010.
Small Business Expensing

• 2006 expense limit of $108,000.
• On total additions under $ 430,000
• Expense would have dropped to $25,000
  after 2007.
Section 179 Expense Limit
• $25,000 limit for SUV’s
• Entity must have “trade or business”
  income.

• NOTE: W-2 wages count as “trade or
  business” income for individuals.
 Small Business Expensing

• Increased expensing allowance extended
  for 2 years.
• Amounts are indexed.
• Through 2009.
       ROTH IRAs … currently

 No deduction for
  contributions.
 Qualified distributions
  from a ROTH IRA are
  entirely tax free.
 There are no “required
  distributions” at age 70 ½
  as with a traditional IRA.
     ROTH IRAs … currently

 Prohibit
  “conversions” at
  $100,000 of adjusted
  gross income (“AGI”)
 Phase out
  contributions
  beginning at
  $150,000 of “AGI”
      ROTH IRAs … New Law

 $100,000 “AGI”
  ceiling on
  conversions after
  2009 is removed.
 Conversions in 2010
  may be taxed over 2
  subsequent years.
 No 10% Penalty
       ROTH IRAs … Planning

 Fund Maximum non-
  deductible IRA
  contributions through
  2009
 Convert traditional IRAs
  to ROTHs in 2010
 Avoid tax on all future
  appreciation.
            Kiddie Tax

• Requires “unearned
  income” (int, div) of
  children in excess of
  $1,700 to be taxed
  at parents’ tax rate.
• Minimizes the
  opportunity for
  “income shifting”.
           Kiddie Tax

• Under old law this
  applied if child was
  under age 14 at year
  end.
• Under new law it
  applies if child is
  under age 18 at year
  end.
“Trailer” Bill … may extend

• State and local sales
  tax deduction.
• Teacher’s classroom
  expense deduction.
• R&D provisions.
• Employment tax
  credits.
Other Changes in 2006 …

• IRA Deduction Increased.
• Deduct up to $4,000.
• $5,000 if age 50 or over.
• Phase outs begin at $75,000 or $150,000 if
  you or your spouse are covered under a
  qualified retirement plan.
Other Changes in 2006 …

Domestic Production Activities Deduction.


• Deduct 3% of Qualified Production activity
  Income.
• Increases to 6% in 2007-2009.
• Increases to 9% in later years.
Domestic Production Activities Deduction


• Deduction is based on the lesser of
  “Qualified Production Activity Income” or
  “Taxable income”.
• Deduction can’t exceed 50% of W-2
  wages paid.
What Qualifies …

• Sale of tangible personal property, computer software,
  certain sound recordings, Manufactured, Produced,
  Grown or Extracted in the U.S.
• Construction activities (erection or substantial
  renovation of real property) in the U.S.
• Architectural and Engineering services related
  to construction activities in the U.S.
• Farming and raising livestock will qualify.
“Real Property” includes …

• Residential and
  commercial
  buildings.
• Land improvements.
• Infrastructure.
“Infrastructure” includes …

• Roads
• Power Lines
• Water Systems
• Sewers
• Sidewalks
Domestic Production Activities Deduction


• Sole Proprietors, S Corps, C Corps,
  Partnerships, LLC’s can qualify.
• Reported on Form 8903.
IL Manufacturer’s Purchase Credit

 Earn the credit on the
  purchase of exempt
  manufacturing
  machinery &
  equipment.
 Credit equals 50% of
  the tax that would
  have been paid.
IL Manufacturer’s Purchase Credit

 Use the credit against
  sales or use tax paid on
  production related
  tangible personal
  property.
 Used or consumed in a
  production related
  process.
 Unused credit may be
  carried forward 2 years.
Examples … include

 Fuel, oil, lubricants &
  cleaners.
 Hand tools,
  Protective apparel &
  safety equipment.
IL Manufacturer’s Purchase Credit

 June 30th deadline
  for claiming credit on
  all 2005 purchases.
 File form ST-16 to
  establish the amount
  of your credit.
IL Manufacturer’s Purchase Credit

 “Spend” your credit on
  current taxable
  purchases.
 Fill out form ST-16-C
  with seller.
 Seller keeps top half.
 You keep bottom half.
IL Manufacturer’s Purchase Credit

June 30th deadline
 for reporting credit
 “spent” in the prior
 year.
File form ST-17 to
 report the total
 amount of credit
 used.
•   Use info from all prior yr. Form ST-16-
    C’s
Basic Estate Planning


• Each individual currently (2006-2008) has a
  $2.0 million estate tax exclusion.
• In theory a married couple should be able
  to have $4.0 Million in assets and not pay
  estate tax.
Basic Estate Planning


• Need to review your wills to make sure both
  spouses will take advantage of their 2.0 million
  dollar exemption.
• This is often accomplished with a “Credit
  Shelter Trust”.
• Owning everything as “JTWROS” can work
  against you.
Estate Planning Techniques

• Use Annual Gift Exclusion Amount.
• You may gift up to $12,000 per person
  for 2006 ($24,000 if married) without gift
  or estate tax liability.
Estate Planning Techniques

• Payment of Tuition made directly to
  school does not count towards $12,000
  annual gift limit.
• Grade School, High School & College
  Tuition all qualify.
 TAX TIP – Practice working this fact into
  conversation with wealthy relatives.
• Payment of Medical expense made
  directly to hospital or insurance provider,
  on behalf of another, does not count
  towards $12,000 annual gift limit.
Summary

• Numerous 2006
  changes provide
  opportunities.
• Roth IRA changes.
• U.S. Production
  Activities Deduction.
• Illinois MPC.

                          •Eck, Schafer & Punke, LLP

				
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