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Holiday Tax Update - 2007

Added on 12/21/2007

It’s never too early to start organizing your financial records, so please read on for the latest changes and some helpful hints for the upcoming tax season.

A note on Electronic Filling:

To be eligible for electronic filing you must have the social security numbers for all dependents, even children under one year of age. 

Regarding Social Security Benefits:

If you are going to be eligible to start receiving Social Security benefits, contact the Social Security Administration 3 months before your eligibility date.  You may also do so by calling 1-800-772-1213 or reduce processing time by applying online at www.ssa.gov.  Click on “Social Security...Qualify and Apply”

YOUR TAX DEDUCTIONS:

1. The standard deduction for 2007 for a married couple filing a joint return has been increased to $10,700;  Single, $5,350; Head of Household, $7,850.

2. The personal exemption for 2007 is $3,400.

3. The reimbursement for mileage is $0.485 for 2007 business miles;  $0.20 for medical and $0.14 for charity. 

4. The meal rate for truckers is $52 per day from October 1, 2007.  Per diem rates have changed depending on the area in which you have traveled.

HIGHLIGHTS OF THE TAX LAWS:

1. CHILD TAX CREDIT:

2.MARRIAGE PENALTY RELIEF:

The basic standard deduction for a married couple filing a joint return is double the single standard deduction. The end of the 15% tax bracket for joint returns is twice that for single filers.  These provisions are for 2004 to 2010.

3. INCREASED 10% TAX BRACKET:

For 2007 the 10% Tax Bracket is increased to $15,650 of taxable income for joint filers and $7,825 for single filers.  The 10% bracket for head of    household is $11,200.

4. REDUCTION IN RATES:

The tax rates above 15% are 25%, 28%, 33%, and 35%.

5. DEPRECIATION CHANGES:

The limit on Section 179 expense has been increased to $125,000 for federal only. 

6. HEALTH SAVINGS ACCOUNTS:

There are some changes to the Health Savings Accounts (HSAs) for 2007.  The minimum deductible for the plan to qualify is $1,100 for self coverage and $2,200 for family.  The maximum is $5,500 for self and $11,000 for family.  The maximum contributions to an HAS for 2007 are $2,850 for self and $5,650 for family.  There is an additional amount of $800 per person for someone 55 or older and not enrolled in Medicare.  Finally in 2007 a person can enroll at any time of the year and make contributions to the HAS for all 12 months.

7.DOMESTIC PRODUCTION ACTIVITY:

The domestic production activity deduction is once again available in 2007.  If you are in a specific business in the USA and pay wages, you may be     eligible for the Domestic Production Activity Deduction.  Some of the eligible businesses include manufacturing, growing, construction, engineering & mining.

8. ENERGY CREDITS.

There are several energy credits that are available in 2007. The first two are a credit for energy saving home repairs and installing alternative energy  equipment. To claim the credits for this year the work must be done in 2007. There are also several credits for business including a credit for  energy   efficient commercial buildings. Finally there are credits for purchasing a hybrid or lean burn vehicle. Please check with your preparer for the amounts and limits on the credits.

FROM PENNSYLVANIA …

Pennsylvania had several changes to be aware of in 2007.  The increased eligibility income limits for the PA Property Tax Rebate program continue for 2007.  Taxpayers with an eligibility income up to $35,000 may be eligible.  The income level for the rent rebate was not increased.  The age and other existing requirements are also unchanged.  PA has also had an important law change for corporations.  Beginning January 1, 2007, a federal “S” corporation is automatically recognized as a PA “S” corporation.  A separate election form is no longer required for PA.  If a Federal “S” corporation does not want to be a PA “S” corporation, then it must elect out.  Beginning in 2008 PA will send any tax assessments over $300 by certified mail.  Finally, PA is requesting that

Taxpayers verify their school district codes reported on the PA-40

Have a happy New Year's!