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NEWSLETTER
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2007
Tax Changes (Posted on 11/01/2007) |
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In addition to the
preprogrammed changes discussed and charted in the "Key
2007 Exemptions & Deductions" article, three federal
tax laws passed in 2006 could result in substantially more tax
savings when your 2007 tax return is filed. Here is a summary
of some important changes for 2007 that apply to many clients:
Income Limits Up for Student Loan Interest Deduction.
For 2007, up to $2,500 of interest you pay on qualified higher
education loans may be deductible. The amount of the student
loan interest deduction is phased out if your modified adjusted
gross income (MAGI) is between $55,000 and $70,000 (between
$110,000 and $140,000 if married filing jointly).
Income
Limits Up for Hope and Lifetime Learning Credits. In
2007, the amount of your Hope ($1,650) or Lifetime Learning
($2,000) credit is phased out (gradually reduced) if your modified
adjusted gross income (MAGI) is between $47,000 and $57,000
($94,000 and $114,000 if you file a joint return). Married filing
separately may not qualify for these credits.
Adoption
Benefits Increased. The maximum adoption credit for
2007 has increased to $11,390. Also, the maximum exclusion from
income for benefits under your employer's adoption assistance
program has increased to $11,390. These amounts are phased out
if your modified adjusted gross income is between $170,820 and
$210,820. You cannot claim the credit or exclusion if your income
is $210,820 or more.
Increase in Deductible
Limit for Long-Term Care Premiums. For 2007, the maximum
amount of qualified long-term care premiums you can include
as medical expenses has increased. You can include qualified
long-term care insurance premiums as medical expenses, up to
the amounts charted here:
Long term Care Premium
Deductibility
Note: The limit is for each person.
Mortgage Insurance Premiums. For 2007 you may deduct
mortgage insurance premiums you pay during the year if they
are related to taking out a new mortgage loan in 2007 to either
finance or refinance the purchase of your home. The amount you
can deduct is reduced by 10% for every $1,000 ($500 if your
filing status is married filing separately) by which your adjusted
gross income exceeds $100,000 ($50,000 if your filing status
is married filing separately).
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2007 Key Exemptions and Deductions (Posted
on 11/01/2007) |
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Listed
here for your reference are key deduction rates for 2007.
Personal Exemptions
The personal exemption for each qualifying
dependent increases by $100 for 2007.
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2007 |
2006 |
| Exemption |
$3,400 |
$3,300 |
The exemption phases out by 2% for each $2,500 ($1,250 for married
filing separately) by which your income is over:
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2007 Phase Out |
| Single |
$156,400 |
| Married Filing Separately |
$117,300 |
| Married Filing Jointly |
$234,600 |
| Head of Household |
$195,500 |
2007 Alert: This phaseout amount is now
reduced by 1/3 in 2007.
Standard Mileage Rates
The standard mileage rates for 2007 are:
| Mileage |
2007 Rate/Mile |
| Business Travel |
48.5¢ |
| Medical/Moving |
20.0¢ |
| Charitable Work |
14.0¢ |
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2007 Tax Rates(Posted
on 11/01/2007) |
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The income brackets
for each tax rate are:
| Single |
Married Jointly |
Head of Household |
Tax Rate |
| $1-7,825 |
$1-15,650 |
$1-11,200 |
10% |
| $7,826-31,850 |
$15,651-63,700 |
$11,201-42,650 |
15% |
| $31,851-77,100 |
$63,701-128,500 |
$42,651-110,100 |
25% |
| $77,101-160,850 |
$128,501-195,850 |
$110,101-178,350 |
28% |
| $160,851-349,700 |
$195,851-349,700 |
$178,351-349,700 |
33% |
| Over $349,700 |
Over $349,700 |
Over $349,700 |
35% |
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2007 Medical Expenses(Posted
on 11/01/2007) |
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High health care
costs have taxpayers considering the itemized deduction for
medical expenses with renewed interest. As you may know, the
deduction is limited to the amount of all your unreimbursed
medical expenses that, when combined, exceeds 7.5% of your adjusted
gross income (AGI). For many individuals, surpassing the 7.5%-of-AGI
floor is getting easier. Check the list below for some of the
expenses you may be able to deduct.
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Health insurance
premiums. |
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Co-pays, deductibles,
and other amounts paid out-of-pocket for hospital and
nursing care, visits to doctors and dentists, and prescription
medications. |
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Medically necessary
home improvements. |
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Long-term care
insurance premiums and services (within IRS limits). |
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Transportation
to receive medical treatment, as well as food and lodging
en route. |
Tip: Taxpayers
with medical expenses close to the 7.5% AGI hurdle may want
to see if they can accelerate or decelerate incurring medical
expenses to "bunch" them into a single tax year for
higher deductions.
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2007 Maximize to Minimize(Posted
on 11/01/2007) |
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One of the best
ways to minimize your income taxes is to maximize your pre-tax
contributions to a retirement savings plan. The pre-tax contribution
limits for 2007 are shown below. Try to maximize your contributions
this year for the double benefit of lower income taxes and higher
retirement savings balances.
2007 Retirement Savings Contribution Limits
| Plan Type |
Under Age 50 |
Age 50+ |
| 401(k) |
$15,500 |
$20,500 |
| 403(b) |
$15,500 |
$20,500 |
| SIMPLE |
$10,500 |
$13,000 |
| IRA |
$4,000 |
$5,000 |
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2007 E-Mail Scam Reminder(Posted
on 11/01/2007) |
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The IRS
DOES NOT INITIATE CONTACT VIA E-MAIL. This says it all.
Do not reply to any e-mail that comes from the IRS. The IRS
has warned taxpayers of numerous e-mail scams that are currently
being circulated. From receiving $80 for filling out an IRS
e-mail survey to e-mails from the IRS "Fraud Department"
to file an investigation report. All are cases where crooks
are trying to get your confidential information.
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