Tax Change Highlights - 2007 Tax Return

2007 included several noteworthy tax changes that will affect your tax return. Note that we are presenting information from a tax filing perspective - i.e. what changes should you be aware of (before April 15, 2008) for your 2007 return. Again, we recommend that you consider doing an online tax return for ease, security, and the up-to-date nature of the services.

Standard Deductions for 2007

The great news is that the standard deductions for 2007 were raised. Specific amounts depends on your filing status, age (usually 65 or older), disability, or exemption status. Here are the standard deduction amounts for 2007:

Single - $5,350
Married filing separately - $5,350
Head of household - $7,850
Married taxpayers filing jointly / qualifying widow(er)s - $10,700
Married taxpayers filing separately - $5,350

Exemptions for 2007

More good news! The federal income tax deduction amount for each qualified exemption was increased from $3300 in 2006 to $3400 in 2007. Not a staggering increase but we will take it. Note there are phase-out incomes for 2007:

For married persons filing separately - $117,300
For single individuals - $156,400
For heads of households - $195,500
For married persons filing jointly or qualifying widow(er)s - $234,600

401K Plan Contribution Limit Increase

If you contribute to a 401K, the employee maximum was raised to $15,500 in 2007 (up $500). This is the same for similar plans like the 403b and Federal Thrift Savings Plan. For workers over the age of 50, the maximum was raised to $20,500.

Employee Tax Free Parking

For 2007, employees are not taxed on up to $215/month of employer-paid parking (up $10). Tax-free transportation passes given by employers had an increased cap of $5/month, up to $110/month.

Alternative Minimum Tax (AMT) Exemptions

The AMT exemptions for 2007 were raised by Congress to help avoid additional taxpayers from having to pay AMT:

Single individuals and heads of household - $44,350
Married couples filing jointly - $66,250
Married couples filing separately - $33,125

Visit the IRS website for additional details.