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					        Tax Saving Tips
For Preparing Your 2007 Return




        Advice from CPAs
Recent Tax Law Changes
• Reduced tax rates, new credits
  and increased phase-out limits

• Pension Protection Act of 2006

• Amendment of the Economic
Growth & Tax Relief Reconciliation
Act of 2001
Charitable Contribution Changes

•IRAs
   •Distributions from an IRA to a qualifying
   charity to be excluded from the owner’s
   income
   • Limited to $100,000
   • Available for a two year period
   • Must be made after the age of 70 ½
Contributions of Capital Gain Real
Property for Conversation Purposes

 •Increased deduction limit of 50% of AGI

 •Farmers can deduct 100%

 •Carry forward period of 15 years
     Tightening the Rules

•The deduction from the contribution of
property will be recaptured if the property
 is not used for an exempt purpose.
• This is effective for contributions made after
September 1, 2006
Tightening the Rules, Continued
        Charitable Contributions of
       Clothing and Household Items

  •Clothing and household items must be in “good used
  condition or better”
  • The limitation does not apply to any single item of
  clothing or household goods over the amount of $500
  supported by an appraisal
  •Does not apply to gifts of food, art objects, jewelry,
  gems or collections.
  •Effective immediately
Tightening the Rules, Continued
     Recordkeeping Requirements

  • Gifts of money can be deducted ONLY if it is
  supported qualifying documentation
  • Receipts must show:
     • the name of the organization
     • date of contribution
     • amount of contribution
  • Effective starting August 17, 2006 (calendar
  2007 for most individual taxpayers)
      Other Provisions
• Repeals the sunset provision in the 2001
Economic Growth and Tax Relief
Reconciliation Act
•The exemption from taxation of qualified
tuition programs are now permanent
    Filing Status

•   Married filing jointly
•   Married filing separately
•   Single
•   Head of Household
•   Qualifying widow(er)
2007 Tax Rates

     •   10%
     •   15%
     •   25%
     •   28%
     •   33%
     •   35%
       Standard Deduction
Filing                          Standard
Status                          Deduction

•   Married filing jointly      $10,700
•   Married filing separately   $ 5,150
•   Single                      $ 5,350
•   Head of Household           $ 7,850
•   Qualifying widow(er)        $10,300
   Standard Deduction

Taxpayers 65 and older or blind get an
additional standard deduction

• Married - $1,050
• Single or Head of Household - $1,300
       Itemizing Deductions
• An alternative to the standard deduction
• Use when these deductions exceed
  standard deduction
• Phase-out rules apply
           -- Single/joint/head of household --
                 $156,400
           -- Married filing separately --
                 $117,300
           -- Married filing jointly –
                 $234,600
        Personal Exemption
Filing Status       Phase-out   Phase-out
                    starts      ends

Joint return        $218,950    $341,450
Head of Household   $182,450    $304,950
Single              $145,950    $268,450
Married filing      $109,475    $170,725
separately
      Timing Strategies

Control tax bill by –
• Deferring income, such as bonuses
• Accelerating deductions, such as
  qualified charitable contributions
• Bunching deductions that are based on
   a percentage of AGI
Tax Strategies for Life

    •   Family
    •   Education
    •   Home
    •   Investments
    •   Retirement
Family Strategies

 •   Child Credit
 •   Dependent Care Credit
 •   Adoption Credit
 •   Earned Income Credit
 •   Shifting Income
                Child Credit
•   Child must be under 17 at year end
•   Child must be claimed as a dependent
•   $1,000 credit per child
•   Reduces tax bill dollar-for-dollar
•   Phase-out for higher income families
     •$110,000 for married, filed jointly
     •$55,000 married, filed separately
     •$75,000 single filers, heads of households
       Adoption Credit

• Credit of up to $11,390 per eligible child
• Exemption for first $11,390
  reimbursed by employer
• Parents adopting special needs
  child get full credit
  Dependent Care Credit

• Child must be under 13 and a dependent
• Tax credit from 20% to 35%
  of qualifying expenses
• Use up to $3,000 of expenses
   ($6,000 for two or more dependents)
   to calculate credit
• Not restricted to children
  Earned Income Credit

Family Size   Maximum Credit

Two or more       $4,710
children

One child         $2,853

No children       $428
  Shifting Income

• Make gifts to children up to $12,000

• Transfer appreciated stock to children

• Hire your children
  •First $5,350 is not taxed and is a
  business deduction
           Tax Credits

• Hope Credit worth up to $1,650
  per student, per year
• Applies to first two years of college only
• Phase-out applies
      Single -- $47,000 -- $57,000
      Joint --    $94,000 -- $110,000
       Tax Credits

• Lifetime Learning Credit of up to
  $2,000 per year
• Applies to undergraduate, graduate
  and professional courses
• Phase-out applies
     Single -- $43,000 -- $53,000
     Joint --    $87,000 -- $107,000
    Student Loan Deduction

• Deduct up to $2,500
• No need to itemize
• No limit on repayment period length
• $50,000 to $65,000 – phase-out range
  for single filers
• $105,000 to $135,000 – phase-out range
  for married filing jointly
              Deductions

• Mortgage interest on first and second homes
• Up to $100,000 in home equity loan
     or line of credit interest
• Points paid on mortgage or refinancing
  • The amortized points from a refinanced
     mortgage are fully deductible
• Real estate property taxes
        Selling Your Home

• Exclude up to $250,000 in capital gains
  from sale of home; $500,000 for joint filers
• Must own and use home as principal residence
  for two out of five years
• Eligible only once every two years
• Reduced exclusion available
         Dividends

• Top dividend tax rate of 15%
• Rate is 5% for taxpayers in 10% and
  15% brackets
• Check ex-dividend date
• Does not apply to interest payments
      Capital Gains Tax


• Maximum tax rate on long-term gains is 15%
• 5% for taxpayers in 10% and 15% brackets
• Asset must be held more than one year
Offset Capital Gains with Losses

  • Capital losses offset capital gains
  • $3,000 ($1,500 for single filers) in net
    capital losses can be deducted against
    ordinary income
  • Beware of wash sale rule
 Employer-Sponsored Plans

• Contributions help reduce tax bill
• Take advantage of employer matches
• $15,000 is 2006 maximum contribution,
  $15,500 in 2007
• $5,000 additional contribution for age 50
  and older
• New for 2006 – “Roth 401(k)”
             IRAs

• $4,000 is maximum 2006/07 contribution
  and $5,000 is maximum for 2008

• $1,000 additional catch-up contribution
  for age 50 or older
• Phase-out applies to Roth IRA only
   •Single filers -- $99,000 -- $114,000
   •Joint filers -- $156,000 -- $166,000
• Open by April 1, 2007
    Structure

•   C Corporation
•   S Corporation
•   Limited Liability Company
•   Partnership
•   Sole proprietor
   Expensing Deduction

• Deduct up to 100% of the cost of up to
  $108,000 in property
• Applies to new or used property
• Equipment must be put into service by
  December 31, 2007
• Now applies to software
• Phase-out rules apply
   •$430,000
Additional Business Strategies

• Deduct 100% of health insurance costs
   if self-employed
• Defer income and accelerate deductions
• Write off bad debt
• Make the most of business-related
  deductions – travel, auto, meals and
  entertainment, interest expenses
   Charitable Deductions

• Donate appreciated property and avoid
   capital gains tax
• Donate clothing, household goods,
  furniture and deduct fair market value
• Volunteer your time and deduct
   qualified travel and related expenses
             FSAs

• Reduce taxable income

• Use up remaining 2007 balances

• Over-the-counter drugs are now allowable
         Avoid AMT
AMT triggers:
• Higher than average dependency exemptions
• Large deductions for state and local
      income taxes and real estate taxes
• High miscellaneous itemized
     deductions and medical expenses
• Incentive stock options
• NYS taxpayers with an AGI of $100,000
     can be affected by AMT
Training for Success

• Focus on tax savings year-round

• Consider year-end opportunities

• Get help if you need it

				
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