Personal exemption and itemized deduction phaseouts reduced. The phaseouts of the personal exemptions and itemized deductions will be reduced by 1/3.

IRA deduction expanded for certain people. You and your spouse, if filing jointly, may each be able to deduct up to $5,000 if age 50 or older at the end of 2006. You may be able to take an IRA deduction if you were covered by a retirement plan and your 2006 modified AGI is less than $85,000 if married filing jointly or qualifying widow(er).

Residential energy credit—New. You may be able to take a residential energy credit for expenses paid in 2006 to have qualified energy saving items installed in your main home.

Alternative motor vehicles. You may be able to take a credit if you place an energy efficient motor vehicle or alternative fuel vehicle refueling property in service in 2006. You can no longer take a deduction for clean-fuel vehicles or refueling property.

Clean renewable energy bond credit— New. You may be able to take a credit based on the face amount of any clean re- newable energy bond you hold during 2006. The amount of any credit before tax liability limits must be included as interest income.

Certain credits no longer allowed against alternative minimum tax (AMT). The credit for child and dependent care expenses, credit for the elderly or the disabled, education credits, mortgage interest credit, and carryforwards of the District Columbia first-time homebuyer credit are no longer allowed against AMT and a new tax liability limit applies. For most people, this limit is your regular tax minus any tentative minimum tax.

AMT exemption amount decreased. The AMT exemption amount will decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).

Educator expense deduction expires. The deduction from AGI for educator expenses will expire. To deduct educator expenses, you must itemize your deductions.

Tuition and fees deduction expires. You cannot take a deduction for qualified tuition and fees paid in 2006. But you still may be able to take a credit for these expenses.

District of Columbia first-time homebuyer credit expires. This credit will not apply to homes purchased after December 31, 2005.

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