AARP Florida: information, advocacy, and benefits for people age 50 and over.

IMPORTANT TAX LAW CHANGES FOR 2007

Standard Deduction Amount Increased: The standard deduction has increased to:

* $10,700 Married filing jointly or qualifying window(er),
* $7,850 Head of Household, and
* $5,350 Single or married filing separately.

Limit on Itemized Deduction Increased: Taxpayers with an adjusted gross income above a certain amount may lose part of their itemized deductions. In 2007, this phase out begins at $156,400 ($78,200) if married filing separately.

Exemption Amount Increased: The amount each taxpayer can deduct for each exemption increased to $3,400.

Phase-out of Personal Exemption Amount: Taxpayers with an adjusted gross income above a certain amount may lose part of their deduction for personal exemptions. In 2007, the phase-out begins at:
• 117,300 for married filing separately,
• 156,400 for single individuals,
• 195,500 for head of household, and
• 234,600 for married filing jointly and qualifying widow(er) s.

Standard business-Related Mileage: The standard mileage rate for the cost of operating a car, van, pickup or panel truck in 2007 is 48.5 Cents per mile for all business miles driven.

Medical and Move-Related Mileage: For 2007, the standard mileage rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 20 cents per mile drive.

Charitable Contributions: New record-keeping requirements for cash contributions: Regardless of the amount, no deduction is allowable unless the taxpayer keeps documentation in the form of a cancelled check, bank copy of check, bank statement with date, amount and name of charity noted or written communication from the charity with date and amount included.

Earned Income Credit (EIC) Amounts Increased: For 2007, the maximum credits are:
* 4,716 Two or more qualifying children,
* 2,853 One qualifying child, and
* 428 No children.

Earned Income Amount Increased: To be eligible for a full or partial credit, the taxpayer must have an earned income of at least $1 but not less than:
• $37,783 ( $39,783 if married filing jointly) and two or more qualifying children,
• $33,241 ( $35,241 if married filing jointly) and one qualifying child, and
• $12,590 ( $14,590 if married filing jointly) with no qualifying children.

Investment Income Amount Increased: Taxpayers whose investment income is more than $2,900 cannot claim EIC .

Nontaxable Combat Pay Election Extended: Taxpayers may elect to have nontaxable combat pay included in their earned income when figuring the earned income credit for 2007. This election was previously due to expire at the end of 2006 but was extended through 2007.

Earned Income Amount for Additional Child Tax Credit: For 2007, the minimum earned income used to figure the additional child tax credit increased to $11,750 .

Social Security and Medicare Taxes: or social security tax, the maximum amount of 2007 wages subject to the tax has increased to $97,500 . For Medicare tax, all wages are subject to the tax.

Income Limit Increased for Hope and Lifetime learning Credits: For 2007, the amount of the Hope and Lifetime learning credit is phased out for taxpayers whose modified adjusted gross income (MAGI) is between $47,000 and $57,000 ($94,000 and $114,000 for a joint return) . Taxpayers cannot claim an education credit if their MAGI is between $55,000 and $70,000 (between $11,000 and $14,000 if married filing jointly). You cannot take the deduction if your MAGI are over $70,000 ($140,000 if filing jointly).

Deductible Long-Term Care Premium Limits Increased: For 2007, the maximum amount of qualified long-term care premiums includable as medical expenses has increased. Qualified long-term care premiums up to the amounts shown below can be included as medical expenses on the Form 1040, Schedule A.
* $290 Age 40 and under
* $550 Age 41 to 50
* $1,110 Age 51 to 60
* $2,950 Age 61 to 70
* $3,680 Age 71 and over
Note: The limit on premiums is for each person.

Income Limits Increased for Education Savings Bond Interest Exclusions: For 2007, the amount of the interest exclusion is phased out for taxpayers-married filing jointly or qualifying widow(er) s-whose MAGI is between $98,400 and $128,400 . If the MAGI is $128,400 or more, no deductions is allowed. For all other filing statuses, the interest exclusion is phased out for taxpayers whose MAGI is between $65,600 and $80,600 . If the MAGI is $80,000 or more, no deduction is allowed.

Self-Employment Tax: The maximum amount of net earning subject to the Social Security part of the self-employment tax has increased to $97,500 .

Modified Adjusted Gross Income (AGI) Limit for Traditional IRA Contribution Increased: If a taxpayer is covered by a retirement plan at work, the deduction for contributions to a traditional IRA is reduced (phased out) if the modified AGI is:
* More than $83,000 but less than $103,000 for married couples filing a joint return or qualifying widow(er) s,
• More than $52,000 but less than $ 62,000 for single individual or head-of-household return, or
• Less than $10,000 for married couples filing separate returns.
If you live with your spouse or file a joint return and the spouse is covered by a plan at work and you are not, your deduction is phased out if your AGI is more than $156,000 but less than $166,000 . The credit is not allowed if AGI is $166,000 or more.

Modified AGI Limit for Retirement Savings Contribution Credit Increased: For 2007, the taxpayer may be able to claim the credit if modified AGI not more than:
• $52,000 for married filing jointly.
• $39,000 for head-of-household, and
• $26,000 for single married filing separately or qualifying widow(er) s.

Mortgage Insurance Premium deduction: Premiums that taxpayer pay or accrues for “qualified mortgage insurance” during 2007 in connection with home acquisition debt on a qualified home are deductible as an itemized deduction. The deduction is subject to limitations due to income. The expense will be claimed in the “Interest You Paid” section of Schedule A.

Tax Benefits related to hurricanes Katrina, Rita and Wilma are no longer applicable for 2007.

Stimulus Plan Tax Changes

Main Fact Sheet.pdf

Exceptions.pdf

Stimulus.pdf

Return to Navigation