Federal Tax law changes

1)     1-Senate Sets Relief from Alternative Minimum Tax (AMT):

The Senate voted Thursday 12/6/07 to Shield about 20 Million Middle- class Tax Payers from an unexpected tax hike this year.

It now faces an uncertain fate in the house, where Democrats have insisted that the $50 billion lost by not collecting the AMT for these filers be offset with new revenue.

The legislation that increased the Alternative Minimum Tax (AMT) exemption for all filling statuses and allowed certain credits to be taken against AMT expired as of December 31, 2006. But Republicans argued there is no need to make up the lost revenue of $50 Billion because the tax was never intended to hit middle-income taxpayers.

Note that (AMT) was the tax law gives Special treatment of Some Kinds of Income and allows special deductions and credits for some Kinds of Expenses.

2)     2-Premiums paid or accrued during 2007 by a taxpayer for qualified mortgage insurance on the taxpayer’s qualified residence mortgage are treated as interest and deducted on Schedule A.

3)      3-The Federal minimum wage rose from $5.15 to $7.25 an hour phased in over three years.

4)      4-The Section 179 deduction limit and phase-put threshold amount were increased to $125,000 and $500, 000 respectively.

5)      5-After August 17, 2006, a charitable contribution deduction will be disallowed for cash contributions, regardless of the amount, unless the donor maintains a record of the contribution.

6)      6- Form 8913- Credit Federal Telephone Excise Tax is obsolete.

7)       7-The FICA tip credit will be figured based on a minimum wage rate of $5.15 per hour (the rate in effect as of January 1, 2007).

8)      8-The following are still applicable for TY 2007: Educator Expense Deduction; Tuition and Fees Deduction; State and Local Sales Tax Deduction; Research Credit ; 15- year MACRS property; Solar Energy Expense; Combat Pay; MSA; Residential Energy Efficient Property Credit.

9)   9-The Kiddie tax continues to apply to children under age 18. In TY 2008, however, it has been expanded to apply to children 18 or over 18 but under 24 and a full-time student, before the close of the tax year.