All of the following items were extracted from the IRS Instruction Booklets for forms 1040A.
What's New for 2007
Tax benefits extended. The following tax benefits were extended through 2007.
- Deduction for educator expenses in figuring adjusted gross income.
- Tuition and fees deduction.
Alternative minimum tax (AMT) exemption amount decreased. The AMT exemption amount is decreased to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).
At the time these instructions went to print, Congress was expected to consider legislation that would increase the amounts above. To find out if legislation was enacted, and for more details, see the Instructions for Form 6251.
Jury duty pay. If you are reporting income received for jury duty, or deducting jury duty pay you gave to your employer, you must file Form 1040.
Penalty on early withdrawal of savings. If you are deducting a penalty on the early withdrawal of savings, you must file Form 1040.
IRA deduction expanded. You may be able to take an IRA deduction if you were covered by a retirement plan and your 2007 modified adjusted gross income (AGI) is less than $62,000 ($103,000 if married filing jointly or qualifying widow(er)).
You may be able to deduct up to an additional $3,000 if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See the instructions for line 17 on page 27.
Earned income credit (EIC). You may be able to take the EIC if:
- A child lived with you and you earned less than $37,783 ($39,783 if married filing jointly), or
- A child did not live with you and you earned less than $12,590 ($14,590 if married filing jointly).
The maximum 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. The maximum investment income you can have and still get the credit has increased to $2,900. See the instructions for lines 40a and 40b that begin on page 38.
Mailing your return. You may be mailing your return to a different address this year because the IRS has changed the filing location for several areas. If you received an envelope with your tax package, please use it. Otherwise, see Where Do You File? on the back cover.
Insurance premiums for retired public safety officers. If you are a retired safety officer, you can elect to exclude from income distributions made directly from your eligible retirement plans to pay premiums for certain insurance. See the instructions for lines 12a and 12b on page 23.
Exemption for housing a person displaced by Hurricane Katrina expires. The additional exemption amount for housing a person displaced by Hurricane Katrina does not apply for 2007 or later years.
Telephone excise tax credit. This credit was available only on your 2006 return. If you filed but did not request it on your 2006 return, file Form 1040X using a simplified procedure explained in its instructions to amend your 2006 return. If you were not required to file a 2006 return, see the 2006 Form 1040EZ-T.
What's New for 2008
IRA deduction expanded. You and your spouse, if filing jointly, each may be able to deduct up to $5,000 ($6,000 if age 50 or older at the end of the year). You may be able to take an IRA deduction if you were covered by a retirement plan and your 2008 modified AGI is less than $63,000 ($105,000 if married filing jointly or qualifying widow(er)).
You may be able to deduct up to an additional $3,000 if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See the instructions for line 17 on page 27.
Earned income credit (EIC). You may be able to take the EIC if:
- A child lived with you and you earned less than $38,646 ($41,646 if married filing jointly), or
- A child did not live with you and you earned less than $12,880 ($15,880 if married filing jointly).
The maximum 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. The maximum investment income you can have and still get the credit has increased to $2,950.
Personal exemption phaseout reduced. Taxpayers with adjusted gross income above a certain amount may lose part of their deduction for personal exemptions. The amount by which this deduction is reduced in 2008 will be only ½ of the amount of the reduction that otherwise would have applied in 2007.
Capital gain tax rate reduced. The 5% capital gain tax rate is reduced to 0%.
Tax on children's income. Form 8615 will be required to figure the tax for the following children with investment income of more than $1,800.
- Children under age 18 at the end of 2008.
- The following children if their earned income is not more than half their support.
- Children age 18 at the end of 2008.
- Children over age 18 and under age 24 at the end of 2008 who are full-time students.
The election to report a child's investment income on a parent's return and the special rule for when a child must file Form 6251 will also apply to the children listed above.
Expiring tax benefits. The following benefits are scheduled to expire and will not apply for 2008.
- Deduction for educator expenses in figuring adjusted gross income.
- Tuition and fees deduction.
- Exclusion from income of qualified charitable distributions.
- The election to include nontaxable combat pay in earned income for the EIC.
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