News

Alternative Minimum Tax - Temporary relief to taxpayers subjected to the Alternative Minimum Tax (AMT) was granted by Congress in late December 2007. The legislation granted a one-year extension of the prior AMT exemptions ($66,250 for joint filers and $44,350 for single filers). Without this change, the 2007 exemption amounts would have reverted to their pre-2001 levels, which would have made many more taxpayers subject to the AMT. Because this change came so late in the year, IRS has indicated that taxpayers subject to AMT will not be able to file their returns until after February 11 so that its systems can be updated to handle the change in the law.

Other Tax News for 2007

Contributions to Charity - Beginning in 2007, all cash donations to charity, regardless of amount, must be substantiated by a cancelled check, bank record, or detailed receipt from the charity or the contribution is not deductible. Other written records, such as a diary or log, do NOT qualify as sufficient substantiation.

Husband and Wife Business Owners - Instead of having to file a partnership tax return, a husband and wife who are sole owners of a business and who file a joint tax return can elect to for 2007 as sole proprietors, with each spouse reporting his or her respective share of the income and expenses on Schedule C of Form 1040.

First Year (Section 179) Expensing Election - For 2007, the limit on first-year expensing deduction for business equipment is increased to $125,000. The limit is reduced if the cost of the qualifying property placed in service during the year exceeds $500,000.

Mortgage Insurance Premium Deduction - For 2007 only, premiums paid for mortgage insurance in connection with home acquisition debt are deductible as interest on Schedule A of Form 1040, provided the mortgage insurance contract was issued in 2007, premiums paid in 2007 are allocated to 2007, and the deduction is not phased out.

IRS Mileage Rates - The business mileage rate for 2007 is 48.5 cents per mile; for charitable volunteers, the deductible mileage rate is 14 cents per mile; for medical and moving expenses, the deductible mileage rate is 12 cents per mile.

Tax Credit for Residential Solar and Fuel Cell Equipment - Energy improvements installed in or on a principal residence in the US qualify for a limited tax credit on Form 5695. The total credit for 2006 and 2007 expenses is limited to $500, of which no more than $200 can be for exterior windows. There is also a limit of $50 for any advanced main air circulating fan, $150 for a qualified furnace or hot water boiler or $300 for any qualified central air conditioner, heat pump or water heater.

Tax Credit for Residential Solar Equipment - For property placed in service in 2007, a credit is allowed for 30% of the cost of qualifying solar panels of up to $2,000 per year, and a similar 30%/$2,000 credit limit for qualifying solar water heaters. The credits do not apply to equipment used to heat swimming pools.

KEY FIGURES FOR THE 2007 TAX YEAR

Standard Deductions
Married Filing Joint Return	$10,700
Surviving Spouse	$10,700
Head of Household	$7,850
Unmarried	$5,350
Married Filing Separate Return	$5,350

Itemized Deductions
Married Filing Separate Return (Phaseout Starts)	$78,200
Others (Phaseout Starts)	$156,400
Casualty Loss (AGI Threshold)	10%
Medical Deduction (AGI Threshold)	7.50%
Miscellaneous (AGI Threshold)	2%

Retirement Plans
SEP Nondiscrimination Compensation Amount	$225,000
401(k) Maximum Compensation Amount	$225,000
401(k) Maximum Exclusion (generally)	$15,500
IRA Deduction Limit (generally)	$4,000
SIMPLE Contribution Limit	$10,500
*Catch-Up Contributions (age 50 and over):*
Traditional and ROTH IRAs	$1,000
SIMPLE IRAs	$2,500
401(k), 403(b), and 457 Plans	$5,000

Adjusted Net Capital Gains
General Rate	15%
Low Rate(Taxpayers in 10% or 15% bracket)	5%
High Rate (Collectibles)	28%
Recaptured Gain on Real Estate	25%