YOUR MONEY
CREDIT, COLLEGE, TAXES AND REAL ESTATE
PRINT
EMAIL
DEL.ICIO.US
DIGG THIS
What’s new for your 2007 tax return? A lot. For starters, tax brackets, personal exemptions and standard deductions have been adjusted for inflation. A last-minute patch from Congress has held the AMT tax from affecting millions of taxpayers. Seniors can also get more money back this year.
Your 2007 - 2008 Tax Savings Guide | |||
 |
2007 Tax Tables | ||
|
|
How to File a Tax Return | ||
|
|
Find 2007 Tax Deductions | ||
|
|
When to Hire a Tax Professional | ||
Let’s take a closer look . . .
Adjusting the tax law for inflation means that if your 2007 income remained the same from 2006, your tax bill will decline. The higher standard deduction and exemption amounts and the inflation-adjusted tax brackets will trigger a $209 savings for a single person who earns $50,000 and claims the standard deduction. A married couple with four children who earned $100,000 in '06 and '07 can enjoy a $518 savings. With these numbers, you'll reap tax savings -- when you file your 2007 return this spring.
The personal exemption -- which you claim for yourself and each dependent -- is $3,400 for 2007, up $100 from the previous tax year.
The standard deduction -- which is used by nearly two-thirds of all taxpayers -- increases for each filing status. Singles get a $200 hike from 2006, to $5,350. Married couples filing jointly see their standard deduction rise to $10,700, $400 more than they claimed on 2006 returns. The standard deduction for heads of household who do not itemize deductions increases $300, to $7,850.
The tax brackets have become broader; meaning more of your income is taxed at lower rates. The 10% bracket on 2007 joint returns covers the first $15,650 of taxable income. That's $550 more than in 2006. Taxing that amount at 10% rather than 15% saves couples $27.50. The higher your income, the more you save as more dollars fall into lower brackets. As the top of the 15% bracket rises, for example, some income that used to be taxed at 25% is now only taxed by the 15% rate.
More 2007 Tax Law Changes
In addition to the tax brackets, personal exemption and standard deduction amounts, several other sections of the tax code are adjusted for inflation.
Extra standard deduction for taxpayers 65 and older. Married taxpayers age 65 and older are allowed to add $1,050 to the regular standard deduction (up from $1,000 on 2006 returns) and singles get an extra $1,300 (up from $1,250).
Kiddie tax trigger. The amount of investment income a child under age 18 can earn before excess earnings are taxed at his or her parents' rate will remain at $1,700 for 2007, the same as for 2006. See all Kiddie Tax changes.
Itemized deduction phase out. Taxpayers begin to lose the value of their itemized deductions after taxable income passes $156,400 in 2007; that's $5,900 higher than the $150,500 trigger point in 2006. Find Your 2007 Tax Deductions
Personal exemption phase out. The income levels at which the value of personal exemptions begin to disappear also rise on 2007 returns. For single taxpayers, the trigger point is $156,400 (up from $150,500 in 2006); for married couples, $234,600 (up from $225,750); and for heads of households, $195,500 (up from $188,150).
Higher Income Limits for Deductible IRAs. If you are covered by a retirement plan at work, you can take a full IRA deduction if your modified adjusted gross income is less than $83,000 (married filing jointly) or $52,000 (single or head of household). A partial deduction is allowed until your adjusted gross income reaches $103,000 if you are married filing jointly or $72,000 if you are single or a head of household.
If you are not covered by an additional work retirement plan, then no income limit applies, you can deduct your full IRA contributions from your taxable income.
New Roth IRA limitations.The opportunity to contribute to a Roth IRA is now phased out as your modified adjusted gross income rises between $156,000 and $166,000 if you are married filing jointly or $99,000 to $114,000 if you are single or a head of household.
Increased contribution limit for 401(k) plans.The maximum employee contribution rises to $15,500 from $15,000 for these and similar workplace retirement plans including 403(b)s and the federal Thrift Savings Plan. The limit for workers age 50 and older rises to $20,500, also a $500 increase from 2006.
Limits on Itemized deductions. Currently, itemized deductions and personal exemptions are phased out (reduced) as your income rises. In 2007, the reduction of itemized deductions occurs once your adjusted gross income exceeds $156,400, regardless of your filing status. Your itemized deductions are reduced by 2% of the amount by which your AGI exceeds $156,400, but you can never lose more than 80% of your itemized deductions.
Limits on Personal Exemptions. Personal exemptions are reduced by 2% for each $2,500 of adjusted gross income over $234,600 for marrieds filing jointly, $195,500 for heads of households and $156,400 for singles, but the reduction cannot exceed $2,200 per exemption.
Alternative Minimum Tax (AMT). Congress approved a last-minute patch that will prevent about 23 million new taxpayers from being hit by the AMT this year, compared to four million who paid it last year. The president is expected to sign the legislation to enact the one-year fix. More on the AMT Tax Mess
See 2007 Tax Tables
|
Your 2007 - 2008 Tax Savings Guide | |||
|
|
How to File a Tax Return | ||
|
|
Find 2007 Tax Deductions | ||
|
|
When to Hire a Tax Professional | ||
