Every year, as way to make itself feel important and useful, the federal government makes modifications to the tax code. Here’s a detailed breakdown of all the changes for 2007 and how they affect your wallet, from AMT exemption amounts, to deductions for business-related mileage.
AMT exemption amount increased: The AMT exemption amount has increased to $44,350 ($66,250 if married filing jointly or qualifying widow(er); $33,125 if married filing separately).
Exemption amount for a child: The minimum exemption amount for a child under 18 increased to $6,300.
Charitable Contributions: New recordkeeping requirement for cash contributions.: You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written communication from the charity. The written communications must include the name of the charity, date of the contribution, and amount of the contribution.
District of Columbia First-Time Homebuyer Credit Extended: The credit for the first-time purchase of a home in the District of Columbia was extended through 2007. To claim this credit, use Form 8859.
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 (MAG) 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).
Mortgage Insurance Premiums Treated as Home Mortgage Interest: Premiums that you pay or accrue for “qualified mortgage insurance” during 2007 in connection with home acquisition debt on your qualified home are deductible as home mortgage interest. The amount you can deduct is reduced by 10% (.10) for every $1,000 ($500 if your filing status is married filing separately) by which your adjusted gross income exceeds $100,000 ($50,000 if your filing status is married filing separately).
Qualified mortgage insurance: If you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the taxable year, such premiums are treated as paid in the period to which they are allocated. No deduction is allowed for the unamortized balances if the mortgage is satisfied before its term (except in the case of qualified mortgage insurance provided by the Department of Veteran Affairs or Rural Housing Administration).
Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as home mortgage interest.
Mortgage insurance premiums you paid or accrued after December 31, 2007, or that are properly allocable to any period after December 31, 2007, are not deductible as home mortgage interest.
Social Security and Medicare Taxes: The maximum amount of wages subject to the social security tax for 2007 is $97,500, the ceiling for 2008 is $102,000. There is no limit on the amount of wages subject to the Medicare tax.
Standard Mileage Rates: Business-related mileage: For 2007, the standard mileage rate for the cost of operating your car for business use is 48½ cents per mile.
Medical-and-move related mileage: For 2007, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 20 cents per mile.
Charitable-related mileage: For 2007, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile.