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Thursday, January 10, 2008

Tax Law Changes for 2007

My mind is already on doing my income tax return for the past year. I'm looking forward to a nice refund...aren't you? I have used an online tax service for my personal taxes for 3 years now and have been quite happy with the service so far.

They have done an excellent job in keeping up with all the latest tax changes. There have been dozens of changes to the tax credits, deductions, and other tax laws since last year, many of which may apply to you. But, who has the time to figure them all out?

Here's some changes you might be interested in knowing, so you can maximize your credits and deductions.

Charitable Contributions: New record keeping requirements for cash contributions mean that you can't deduct a cash contribution, regardless of the amount, unless you keep a record of the contribution. This proof can come in the form of a canceled check, or a bank statement or written communication from the charity if either of those contains the name of charity, the date, and amount.

Earned Income Credit Amount Increased: The maximum amount of the credit has increased to $2,853 if you have one qualifying child, $4,716 if you have more than one qualifying child, or $428 if you do no have a qualifying child.

Earned Income Amount Increased: The maximum amount of income you can earn and still get the credit has increased for 2007.

Expired Tax Benefits: The relief granted for Hurricane Katrina, Rita, and Wilma and the qualified electric vehicle credit have expired and will not apply for 2007.

Income Limits Increased for Hope and Lifetime Learning Credits: For 2007, the amount of your Hope or lifetime learning credit is phased out 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).

Mortgage Insurance Premiums Treated as Home Mortgage Interest: Premiums that you pay for "qualified mortgage insurance" during 2007 in connection with home acquisition debt on your qualified home are deductible as home mortgage interest.

Standard Mileage Rates: For 2007 the standard mileage rate for the cost of operating your car for business use is 48.5 cents per mile. Medical- and move-related mileage is 20 cents per mile, while charitable-related mileage is unchanged at 14 cents per mile.

Credit for Prior Year Minimum Tax: If you have any unused minimum tax credit carry forward from 2004 or earlier years, your minimum tax credit allowable for 2007 is not less than the "AMT refundable credit amount." In addition, a portion of the credit may be refundable in 2007, so if the refundable part is more than your tax, you can get a refund of the difference.

Income Limits Increased for Student Loan Interest Deduction: For 2007, the amount you can deduct for student loan interest is gradually phased out if your MAGI is between $55,000 and $70,000 ($110,000 and $140,000 if you file a joint return).

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