Tax laws often impose timelines during which a particular deduction or credit can be claimed. The following tax breaks are scheduled to expire at the end of 2007:
CHARITABLE CONTRIBUTIONS FROM IRA DISTRIBUTIONS
Through 2007, those aged 70 1/2 or older could withdraw amounts up to $100,000 from IRA accounts for charitable donations without paying taxes on the amount.
DISTRICT OF COLUMBIA FIRST-TIME HOMEBUYER CREDIT
District of Columbia residents who purchased their first residence there in 2007 are eligible to claim a credit. The amount is the smaller amount of either the home purchase price, or $5,000 for couples married filing jointly, or $2,500 for married filing jointly. This credit is subject to income phaseout limits.
EDUCATORS – TAX BREAK ELIGIBILITY
eSmart Tax reminds you that eligible educators who spend their own money on classroom supplies may qualify for a tax break when filing a 2007 return. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide who works at least 900 hours in either a public or private school. The adjustment for these expenses, of no more than $250, can be claimed whether or not the taxpayer can itemize.
ENERGY EFFICIENT RESIDENTIAL PROPERTY CREDIT
eSmart Tax reminds you that for eligible property placed in service during 2007 you can claim a credit of up to $500 of the cost of certain energy efficient property. The residential energy credit may offer a tax break on a 2007 return if all installation is done and/or work was completed in 2007. Residential energy credits apply to homes, houseboats, mobile homes, condominium, and qualifying manufactured homes. The credit is for 2006 and 2007 and the maximum credit amount is $500 for both years.
MILITARY COMBAT PAY – EARNED INCOME CREDIT (EIC)
eSmart Tax reminds you that if you serve in a combat zone, you may elect to include combat pay in the earned income amount used to figure your earned income credit for 2007 and 2008. The maximum earned income credit for two or more qualifying children is $4,716 and for one child it is $2,853. For a taxpayer who does not have a qualifying child, the maximum earned income credit is $428. This will expire after 2007.
MORTGAGE PREMIUM DEDUCTION
Did you buy a home in 2007? eSmart Tax reminds you that you may take an itemized deduction for "qualified mortgage insurance premiums" paid or accrued in 2007 as a result of home acquisition debt. The deductible amount is subject to a phase-out of 10% for taxpayers who are married filing jointly with an adjusted gross income of over $100,000 ($50,000 for taxpayers filing married filing separately).
SALES TAX DEDUCTION
eSmart Tax reminds you that taxpayers can take advantage of state sales tax deductions through 2008 if they itemize deductions. Those who live in one of seven states without a state income tax may deduct their state sales tax when they itemize. Taxpayers in states with state income taxes can choose to deduct their state income taxes or state sales taxes, whichever is more advantageous.
TUITION AND FEES DEDUCTION
eSmart Tax reminds you that qualifying higher education expenses such as tuition and fees you paid for yourself, a spouse, or a dependent may be deductible. Up to $4,000 of these expenses can be deductible as an adjustment to income if your adjusted gross income is below $65,000 ($130,000 if married filing jointly). The deduction is limited to $2,000 if your AGI exceeds that limit but is under $80,000 ($160,000 if MFJ). The taxpayer cannot claim both this deduction and the Hope or lifetime learning credit for the same student in the same year.
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