Good news rarely makes the front page, which is why you might have missed the latest tax-law package to come out of Washington. The Tax Increase Prevention and Reconciliation Act of 2005, which became law in May 2006, contained several provisions that you may want to be aware of.

• Two-year extension of lower tax rates on dividends and capital gains: Long-term capital gains and dividends will be taxed at a maximum 15 percent rate through 2010 for people in the upper marginal income tax brackets. For taxpayers in the 10 percent and 15 percent brackets, the tax rate on capital gains and dividends is 5 percent through 2007 and then zero through 2010. Without the extension, dividend income would have been taxed as ordinary income, which is subject to rates up to 35 percent, and capital gains would have been taxed at a maximum 20 percent rate beginning in 2009.
  
  
• Alternative minimum tax relief: An exemption that helped many middle-income taxpayers avoid the alternative minimum tax (AMT) in 2005 has been increased and extended for the 2006 tax year. The new exemption levels are $62,550 for joint filers and $42,500 for single filers.

Also extended was a provision that allows some taxpayers to claim many nonrefundable personal credits to offset AMT liability. These include the dependent-care credit, the credit for the disabled and elderly, the credit for interest on certain home mortgages, and the Hope and Lifetime Learning credits for higher-education expenses.

New Tax Law Extends Key Provisions