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Charitable Contributions
New recordkeeping requirements for cash contributions. You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written communication from the charity. The written communication must include the name of the charity, date of the contribution, and amount of the contribution. For more information, see Publication 526, Charitable Contributions http://http://www.irs.gov/pub/irs-pdf/p526.pdfStandard mileage rate related to Hurricane Katrina. If you used your car in giving services to a charitable organization to provide relief related to Hurricane Katrina, the standard mileage rate for 2006 is 32 cents a mile.
Clothing and household items. You cannot take a deduction for clothing or household items you donate after August 17, 2006, unless the clothing or household items are in good used condition or better.
Earned Income Credit Amounts Increase The following paragraphs explain the changes to the credit for 2007.
Amount of credit increased. The maximum amount of the credit has increased. The most you can get is:
$2,853 if you have one qualifying child,
$4,716 if you have more than one qualifying child, or
$428 if you do not have a qualifying child.
Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2007. You may be able to take the credit if:
You have more than one qualifying child and you earn less than $37,783 ($39,783 if married filing jointly),
You have one qualifying child and you earn less than $33,241 ($35,241 if married filing jointly), or
You do not have a qualifying child and you earn less than $12,590 ($14,590 if married filing jointly).
The maximum amount of adjusted gross income (AGI) you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.
Investment income amount increased. The maximum amount of investment income you can have and still get the credit has increased to $2,900 for 2007.
Advance payment of the credit. If you get advance payments of the credit from your employer with your pay, the total advance payments you get during 2007 can be as much as $1,712.
Nontaxable combat pay election extended. You can elect to have your nontaxable combat pay included in earned income when you figure your earned income credit for 2007. This election was previously due to expire at the end of 2006 but has been extended through 2007. For more information about the election, see Publication 596. http://http://www.irs.gov/pub/irs-pdf/p596.pdf Earned Income Amount for Additional Child Tax Credit
For 2007, the minimum earned income amount used to figure the additional child tax credit has increased to $11,750.
Expired Tax Benefits
The following tax benefits have expired and will not apply for 2007.
Relief granted for Hurricanes Katrina, Rita, and Wilma.
Tax-favored treatment of qualified hurricane distributions from eligible retirement plans.
Increased limits and delayed repayment on loans from qualified employer plans.
Special rules so a temporary relocation did not affect whether you provided more than half of an individual's support, whether you furnished more than half the cost of keeping up a household, and whether you could treat an individual as a student.
Increased limits and an expanded definition of qualified education expenses for the Hope and lifetime learning credits.
Additional exemption for housing individuals displaced by Hurricane Katrina.
Exclusion from income for discharge of nonbusiness debt by reason of Hurricane Katrina.
Qualified electric vehicle credit. You cannot claim this credit for any vehicle you placed in service after 2006
Health Savings Accounts (HSAs)
High deductible health plan. (HDHP) For HSA purposes, the minimum annual deductible of an HDHP increases to $1,100 ($2,200 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,500 ($11,000 for family coverage).
Deductible limitation on contributions. The annual deductible limitation for contributions to your HSA based on the amount of your health insurance deductible is repealed. For 2007, the maximum HSA deduction increases to $2,850 ($5,650 for family coverage) regardless of the amount of your health insurance deductible. The maximum additional deduction for individuals age 55 or older increases to $800.
Deductible contributions for part-year coverage. For HSA purposes, you can be treated as an eligible individual for each month in your tax year if you are an eligible individual during the last month of your tax year. This applies to each month for which you would not otherwise qualify as an eligible individual. For these months, you are treated as enrolled in the same HDHP that you were enrolled in for the last month of your tax year. However, if you are not an eligible individual, for any reason other than death or becoming disabled, for the 12 months following the end of your tax year, any contribution attributable to these months is included in your income and is subject to an additional 10% tax. The income and additional 10% tax are reported for the tax year in which you cease to be an eligible individual.
Transfers from a health reimbursement arrangement (HRA) or health flexible spending arrangement (FSA) to an HSA. Your employer can make a one-time direct transfer of the balance in your HRA or health FSA to your HSA without violating the requirements for those arrangements. The maximum allowable transfer is the lesser of the HRA or health FSA balance on September 21, 2006, or on the date of transfer.
The amount transferred is not included in your gross income, is not taken into account in applying the HSA contribution limitation, and is not deductible. However, if you are not an eligible individual, for any reason other than death or becoming disabled, for the 12 months following the month of the transfer, the amount transferred is included in your income and is subject to an additional 10% tax. The income and additional 10% tax are reported for the tax year in which you cease to be an eligible individual.
If the employer makes a transfer available to any employee, all employees who are covered under an HDHP of the employer must be allowed to make a transfer. Otherwise, the employer is subject to an excise tax.
Generally, you are not an eligible individual for an HSA if you have health coverage other than an HDHP. For tax years beginning after 2006, coverage under a health FSA for the period immediately following the health FSA's plan year during which unused benefits or contributions remaining at the end of the year may be paid or reimbursed to you for qualified expenses incurred during that period does not disqualify you from being an eligible individual. The coverage does not disqualify you if the balance in the health FSA at the end of the plan year is zero or the entire remaining balance in the health FSA is transferred to your HSA as described above.
Comparable contributions by an employer. An employer that makes contributions to the HSAs of employees must make comparable contributions to all comparable participating employees' HSAs. For tax years beginning after 2006, for purposes of making contributions to the HSA of an employee who is not highly compensated, a comparable participating employee does not include a highly compensated employee. For more information on 2007 tax law changes click here:
This page was last modified on 11.18.07 |
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