James R. Kay, CPA

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Tax Law Changes for 2007

Restrictions on Charitable Contributions

All cash contributions made in tax years beginning after August 17, 2006, to any qualified charity must be supported by a dated bank record or a dated receipt.

Exemption Amount Increased

The amount you can deduct for each exemption has increased from $3,300 in 2006 to $3,400 in 2007.

You may lose part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2007, the beginning and ending phaseout amounts are:

Filing Status

Adjusted Gross Income -- Beginning of Phaseout

Adjusted Gross Income -- Maximum Phaseout

Single

$156,400

$278,900

Married filing jointly and Surviving spouse

$234,600

$357,100

Married filing separately

$117,300

$178,550

Head of household

$195,500

$318,000

 

Income Limits Increased for Hope and Lifetime Learning Credits

For 2007, the amount of your Hope or lifetime learning 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). You cannot claim an education credit if your MAGI is $57,000 or more ($114,000 or more if you file a joint return). This is an increase from the 2006 limits of $45,000 and $55,000 ($90,000 and $110,000 if filing a joint return). For more information, see chapters 2 and 3 in Publication 970, Tax Benefits for Education

Social Security and Medicare Taxes

For 2007, the employer and employee will continue to pay:

1.  6.2% each for social security tax (old-age, survivors, and disability insurance), and

2.  1.45% each for Medicare tax (hospital insurance).

Wage limits. For social security tax, the maximum amount of 2007 wages subject to the tax is $97,500. For Medicare tax, all covered 2007 wages are subject to the tax.

Standard Deduction Amount Increased

The standard deduction for taxpayers who do not itemize deductions on Schedule A of Form 1040 is, in most cases, higher for 2007 than it was for 2006. The amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer.

The basic standard deduction amounts for 2007 are:

  • Head of household $7,850
  • Married taxpayers filing jointly and qualifying widow(er)s $10,700
  • Married taxpayers filing separately $5,350
  • Single $5,350

The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $850 or the sum of $300 and the individual's earned income.

For 2007, the additional standard deduction amount for a person who is age 65 or older or blind is $1,050. If you are single and not a surviving spouse, the additional standard deduction amount is $1,300.

Standard Mileage Rates

Beginning January 1, 2007, the allowable deductions for the standard mileage rate are as follows:

  • Business miles. The standard mileage rate for the cost of operating your car increases to 48.5 cents a mile for all business miles driven.
  • Charitable services. The standard mileage rate allowed for use of your car when you use your car to provide charitable services to a charitable organization remains at 14 cents a mile.
  • Medical reasons. The standard mileage rate allowed for use of your car for medical reasons increases to 20 cents a mile.
  • Moving. The standard mileage rate for determining moving expenses increases to 20 cents a mile.

 

Schedule X Single

If taxable income is  over--

But not over--

The tax is:

$0

$7,825

10% of the amount over $0

$7,825

$31,850

$782.50 plus 15% of the amount over 7,825

$31,850

$77,100

$4,386.25 plus 25% of the amount over 31,850

$77,100

$160,850

$15,698.75 plus 28% of the amount over 77,100

$160,850

$349,700

$39,148.75 plus 33% of the amount over 160,850

$349,700

no limit

$101,469.25 plus 35% of the amount over 349,700

 

Schedule Y-1 Married Filing Jointly or Qualifying Widow(er)

If taxable income is over--

But not over--

The tax is:

$0

$15,650

10% of the amount over $0

$15,650

$63,700

$1,565.00 plus 15% of the amount over 15,650

$63,700

$128,500

$8,772.50 plus 25% of the amount over 63,700

$128,500

$195,850

$24,972.50 plus 28% of the amount over 128,500

$195,850

$349,700

$43,830.50 plus 33% of the amount over 195,850

$349,700

no limit

$94,601.00 plus 35% of the amount over 349,700

 

Schedule Y-2 Married Filing Separately

If taxable income is over--

But not over--

The tax is:

$0

$7,825

10% of the amount over $0

$7,825

$31,850

$782.50 plus 15% of the amount over 7,825

$31,850

$64,250

$4,386.25 plus 25% of the amount over 31,850

$64,250

$97,925

$12,486.25 plus 28% of the amount over 64,250

$97,925

$174,850

$21,915.25 plus 33% of the amount over 97,925

$174,850

no limit

$47,300.50 plus 35% of the amount over 174,850

 

Schedule Z Head of Household

If taxable income is over--

But not over--

The tax is:

$0

$11,200

10% of the amount over $0

$11,200

$42,650

$1,120.00 plus 15% of the amount over 11,200

$42,650

$110,100

$5,837.50 plus 25% of the amount over 42,650

$110,100

$178,350

$22,700.00 plus 28% of the amount over 110,100

$178,350

$349,700

$41,810.00 plus 33% of the amount over 178,350

$349,700

no limit

$98,355.50 plus 35% of the amount over 349,700

 

Talk to your Accountant

If you would like to discuss how the new tax laws may affect your own individual or family situation, please contact us.

 

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