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This newsletter offers factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects.  No party assumes liability for any loss or damage resulting from reliance or use of this material.

TAX CHANGES FOR 2007

 March 2007 Continued

Many tax changes take effect January 1, 2007.  Congress approved several of them during 2006 but delayed their debut until 2007.

 

Health Savings Accounts (HSA’s)now have higher deductible contributions, up to $5,650 for family coverage and $2,850 for individual coverage.  Additionally, IRA funds & money left in flex spending accounts can be rolled into HSA’s.

 

Businesses can now write-off up to $112,000 of assets purchased during 2007.  In order to qualify for this deduction the business must have a profit for the year and the total dollar amount of assets purchased during the year must be less than $450,000.

 

Private mortgage insurance can now be deducted by individuals who itemize in 2007.  In order to qualify the policy must be issued after 2006 and the deduction phases out for couples whose income is over $100,000 and singles whose income is over $50,000.

 

The gift tax exclusion remains unchanged for 2007 at $12,000 per donee.

The adoption tax credit increases as well.  Costs up to $11,390 for normal adoptions qualify for the credit.  Adoptions of special-needs children get the full $11,390 credit, even if the actual expenses were less.  The tax credit begins to phase out when a tax payer’s income reaches $170,820 and completely phases out at $210,820 of income.

Social security wage base increases

The social security wage base is expected to be $102,600 for 2008, up from $5,100 from this year’s figure of $97,500.  That is the official forecast from President Bush’s budget, based on data supplied by the Social Security Administration.  The tax rates will not change, 7.65% on employers and employees alike.