2007 Tax Law Changes

There were several important changes to tax law for the year 2007. Below is a brief summary of some of the most significant changes.

Alternative Minimum Tax Exemption Increased for One Year
The alternative minimum tax exemption has been increased to $66,250 for a married couple filing a joint return for the tax year 2007 (an increase from $62,550 last year). For married people filing separately, the new figure is $33,125. For singles, it's $44,350. These changes will force approximately 13 million taxpayers to wait until February 11, 2008 in order to file.

Return of Popular Tax Breaks
Several tax breaks that were previously renewed too late to be included on 2006 tax forms make their return this year. Because of this, taxpayers can stop bothering with special instructions in order to claim the educator expense deduction, the tuition and fees deduction and the deduction for state and local sales taxes.

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Higher Contribution Limit for IRAs (And Some Other Retirement Plans)
Good news for people who make contributions to an IRA: the limit for these tax-deductible contributions has been raised. The deduction will be phased out for singles (as well as heads of household) if they are covered by a workplace retirement plan and with incomes between $52,000 and $62,000 (which is an increase over the $50,000 to $60,000 figures of last year). If the spouse making the IRA contribution is under a workplace retirement plan, the phase-out range changes to $83,000 to $103,000 (which is up from $75,000 to $85,000 in 2006). The phase-out range is unchanged for a married individual filing a separate return and who is covered by a retirement plan by his or her employer.

In addition to this, the contribution limit for people who participate in 401(k), 403(b) and most 457 plans will increase $500 to a new limit of $15,500.

Changes to Charitable Donations
In order to be able to deduct charitable donations, it's essential for taxpayers to have a written document (from the band or from the recipient) that clearly specifies the date, amount donated and name of the charitable organization. Though this may not seem like a new requirement, it is not even more important for taxpayers to be able to show evidence of their charitable contributions.