For those of you who like to get their taxes done right away, make sure you’re aware of some delays the IRS is having due to some late changes in the tax code. For the rest of us that wait til the last minute to file or choose to file an extension, we won’t have to worry about some of the delays. For a really good article on the changes, read this Marketwatch article by Andrea Coombes…
Here is a summary of some of the main changes to the Tax Laws in 2007:
Alternative Minimum Tax (AMT):
Congress passed a “patch” to keep income limits in line with the non-AMT income thresholds. This should help some of you who may have fallen into the AMT last year. Because the changes to the AMT didn’t happen until 12/19/07, the IRS is still updating the necessary forms and therefore must wait until after 2/10/08 to file.
- Deductibility of private mortgage insurance (PMI)
- Mortgage Forgiveness Debt Relief
Form 1040 Changes:
- addition of deductions for higher education tuition and teacher’s expenses (you’ll need the New Form 8917)
Stricter Giving Rules:
- you now need a receipt (for your records) for all contributions made by with cash, even if it’s under $250.
- Clothing & household items need to be in “good” or better condition to qualify as a deduction. Consider taking a picture of the item to have in your file in case the IRS wants verification during an audit.
- If you donated a car or anything over $5,000, you need a qualified appraisal.
More Perks for Higher Income Earners:
- Allowable itemized deductions were reduced for AGI’s above $145,950 by 3%. That 3% has been lowered to 2% for 2006 & 2007. This will be reduced again to 1% in 2008 and zero in 2010.
- So if your AGI is above $145,950, you’ll be able to claim more of your deductions.
Some good habits to develop to maximize your tax deductions:
- Keep a notebook or journal in your car and Track your actual mileage (date, beginning miles, ending miles, who met with)
- Keep an envelope handy to store your receipts for office supplies, meals with clients, and other business related expenses.
- work with a qualified CPA to maximize your deductions and better yet, so you can plan ahead and are prepared for changes in the tax code.
This post is meant to provide a quick snapshop of some of the tax changes. Please consult with a qualified tax professional and/or CPA to gain a better understanding of how these changes effect you.
the Cashflow Coach