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TIP: Find Out Which Tax Changes Are Important For You
Tip of the Month
February 2008
TIP: Find Out Which Tax Changes Are Important For You
Here’s an overview of some key changes –as always this general commentary is no substitute for counsel from your own tax specialist:
- Tax Increase Prevention Act of 2007 –Alternative Minimum Tax (AMT) Patch
Designed to prevent millions of taxpayers from being caught up in the alternative minimum tax (AMT) rules, this one-year “patch” raises exemptions from $62,550 to $66,250 for married individuals filing jointly; from $42,500 to $44,350 for unmarried individuals; and from $31,275 to $33,125 for married individuals filing separately. The “patch” also allows personal nonrefundable credits to offset 2007 AMT liabilities. Applicable personal credits include (but are not limited to): dependent child; dependent care; adoption credit; retirement saver’s credit; energy efficiency equipment or improvements for the home; hope scholarship and lifetime learning education credits. - Mortgage Forgiveness Debt Relief Act of 2007
There are several provisions in this Act. One provides three-year income exclusion for the qualifying discharge of principal residence debt. Homeowners will be eligible for a reprieve on taxes they would normally owe when their mortgage loan is either fully or partially “forgiven” by the lender. This Act also extends the married joint-filers home sale gain exclusion for home sales after December 31, 2007, to include surviving spouses. Previously surviving spouses were limited to a $250,000 exclusion, rather than the $500,000 for married joint-filers. The more generous provision is subject to timeline and other requirements. Check with your tax professional for more information on this clause. The 2007 Act also extends the mortgage insurance premium write-off provision for three more years through 2010. There are some phase-out provisions that may prevent some taxpayers for qualifying for this write-off. Your tax consultant can help determine your possible eligibility. - The Unemployment Tax Surcharge Is Extended Through 2008
In a move that will affect small and large businesses, Congress voted to continue the 0.2 percent surtax through to the end of 2008. This means the combined Federal Unemployment Tax Act (FUTA) will remain at 6.2 percent.
- Elimination of the current 10 percent tax on the first $6,000 dollars of taxable income for individuals and $12,000 for couples. A minimum tax rebate of $300 for individuals and $600 for couples would be available for those with earned income of at least $3,000. These tax breaks would be available for single tax payers with adjusted gross income of less than $75,000 or $150,000 for married couples who file jointly. It will be phased out for taxpayers whose income exceeds those ceilings. For those who are eligible, an additional $300 credit per child would also be available.
- Incentives to spur business investment include some $50 billion in temporary changes to the tax code to allow businesses that buy new equipment in 2008 to deduct an additional 50 percent of their investment.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.
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