The IRS recently released its Fall 2008 Statistics of Income (SOI) Bulletin, which provides key statistics about federal income tax returns filed for the 2006 tax year. In general, the SOI Bulletin reflects increases in income and deductions over the previous year, clear signs?of an economy and investment markets that were then still thriving. The tax trends seen in 2006 have likely been reversed during the more recent tax years, when wealth-building has taken a major hit.

Consider these noteworthy statistics from the 2006 tax year:

• Taxpayers filed 138.4 million returns, an increase of 3% from 2005. The collective adjusted gross income (AGI) on these returns totaled a staggering $8 trillion, 8.2% higher than in the preceding year. Taxable income also increased, by 8.6%, to $5.6 trillion.
• Several income items jumped significantly, a byproduct of the bull market in stocks that was in full force at the time. Taxable interest rose 37.1%, ordinary dividends were up 19.7%, and net capital gains were 16.7% higher.
• Total income tax paid rose to $1 trillion in 2006, up 9.5% from 2005. That marked the third straight year in which total income tax increased.
• For the fourth consecutive year, taxpayers saw higher alternative minimum tax (AMT) bills. Total AMT paid rose 23.8% from $17.5 billion to $21.6 billion. But the number of returns with AMT liability decreased 1%—the first decline in AMT numbers since 2001.

The 2006 tax year also saw several changes related to itemized deductions—again, largely a sign of an economy and financial markets that were still flourishing.

• Total itemized deductions increased for 2006 to $1.23 trillion, a rise of 9.6%.
• The largest itemized deduction, for interest paid, rose 16% to $470.5 billion. 
• The second largest deduction—taxes paid—increased by 8.1% to $432.8 billion. 
• Deductions for casualty and?theft losses declined dramatically to $5.1 billion from a record high?of $15 billion the prior year, likely constituting a return to normal after Hurricane Katrina and other natural disasters had devastated personal property in 2005. Also, with higher AGIs, the opportunity for casualty deductions was limited since you can only take the deduction to the extent that the amount exceeds 10% of AGI.

Finally, the report on the 2006 tax year also provides valuable data about corporate and partnership returns.?To see those and other revealing statistics, download the SOI Bulletin at www.irs.gov/pub/irs-soi/08fallbulintax.pdf. You can compare your own situation to that of the nation’s taxpayers as a whole—and find a picture of a U.S. economy that may not soon return.