James R. Kay,
Helping you keep more of what you earn !
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:
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:
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:
Schedule X — Single
Schedule Y-1 — Married Filing Jointly or Qualifying Widow(er)
Schedule Y-2 — Married Filing Separately
Schedule Z — Head of Household
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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