Key Provisions of the Tax Increase Prevention and Reconciliation Act Affecting Small Businesses and Individual Taxpayers

On May 17, 2006, President Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). TIPRA is projected to result in tax cuts of $70 billion for the period 2006 to 2010. TIPRA contains many provisions covering all types of taxpayers. Section 179, Election to Expense Certain Depreciable Business Assets, generally allows a taxpayer to expense certain long-lived properties in the year they are place in service. TIPRA has extended the higher expensing dollar limit to tax years beginning before 2010. TIPRA has also extended the capital gains and dividend rate provisions originally contained in the Jobs and Growth Tax Relief Reconciliation Act of 2003 Title III. TIPRA includes taxing dividends at long-term capital gains rates, and continuing the general long-term capital gain rate of 15%. TIPRA has made some short-term (at present one tax year) adjustments in the alternative minimum tax (AMT) statute as applied to individuals. TIPRA removes the income limitation on rollovers to a Roth IRA for tax years beginning after December 31, 2009.