Congress took its time moving through changes on 2007 tax law. So before you
file, check to see if these apply to you:
The Tax Increase Prevention Act of 2007
This changed exemption rates to $44,350 for singles, $66,250 for married filing
jointly and $33,125 for married filing separately. It also now allows taxpayers
to use many nonrefundable personal credits to offset liability for the
alternative minimum tax. The adoption, child and saver's credit could already be
used in this way, but the new law also allows credit for dependent care expenses
(Form 2441) and the Hope and Lifetime learning education credit (Form 8863).
The Mortgage Forgiveness
Debt Relief Act of 2007
This act has a number of debt forgiveness provisions including:
1. A three-year exemption for debt forgiveness on qualified home loans, meaning
any write-down on a mortgage or interest won't create taxable income.
2. A three-year extension on the mortgage insurance premium deduction, allowing
the continuation of an itemized deduction for some types of mortgage insurance.
Look to line 13, Schedule A for this.
3. A benefit on the sale of a residence that was jointly owned and occupied by a
surviving and deceased spouse, which began Jan. 1, 2008. The surviving spouse
can now exclude up to $500,000 in gain on the sale of the residence, as long as
the sale takes place no more than two years after the death of the spouse.
4. Also beginning in January 2008, volunteer firefighters and emergency medical
responders who are taxpayers can exclude from income up to $360 annually of
payments provided for their services.
Bankruptcy Filings Soar
The number of people filing for bankruptcy should matter to everyone. It's a
measure of how the economy is doing, plus there's that far-reaching ripple once
someone has made it official they won't be paying their debts.
In 2007, consumer bankruptcy filings went up 40%. The National Bankruptcy
Research Center has released numbers showing there were 801,840 consumer
bankruptcy filings—up from 573,203 in 2006.
Early expectations are that 2008 will be worse.
401K—Make a Claim for Retirement Savings Contributions
If you contribute to a qualified retirement plan—which includes almost every one
we could think of—don't forget your contributions can probably be claimed on
your federal tax return. Any distributions will reduce the amount of
contribution, and an employer's matching funds don't count. To calculate the
credit, use Form 8880, Credit for Qualified Retirement Savings Contributions.