Tax Changes for 2007

In addition to the preprogrammed changes discussed and charted to the right, three federal tax laws passed in 2006 could result in substantially more tax savings when your 2007 tax return is filed. Here is a summary of some important changes for 2007 that apply to many clients:

Income Limits Up for Student Loan Interest Deduction.

For 2007, up to $2,500 of interest you pay on qualified higher education loans may be deductible. The amount of the student loan interest deduction is phased out if your modified adjusted gross income (MAGI) is between %55,000 and $70,000 (between$110,000 and $140,000 if married filing jointly).

Income Limits Up for Hope and Lifetime Learning Credits.

In 2007, the amount of your hope ($1,650) or Lifetime Learning ($2,000) credit is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $47,000 and $57,000 ($94,000 and $114,000 if you file a joint return). Married filing separately may not qualify for these credits.

Adoption Benefits Increased.

The maximum adoption credit for 2007 has increased to $11,390. Also, the maximum exclusion from income for benefits under your employer’s adoption assistance program has increased to $11,390. These amounts are phased out if your modified adjusted gross income is between $170,820 and $210,820. You cannot claim the credit or exclusion if your income is $210,820 or more.

Increase in Deductible Limit for Long-Term Care Premiums.

For 2007, the maximum amount of qualified long-term care premiums you can include as medical expenses, up to the amounts charted here:

Long Term Care Premium Deductibility

Age 40 or under $290
Age 41 to 50 $550
Age 51 to 60 $1,110
Age 61 to 70 $2,950
Age 71 or over $3,680

*note: The limit is for each person.

Mortgage Insurance Premiums.

For 2007 you may deduct mortgage insurance premiums you pay during the year if they are related to taking out a new mortgage loan in 2007 to either finance or refinance the purchase of your home. The amount you can deduct is reduced by 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).