2007 Tax Law Changes

RESIDENTIAL ENERGY EFFICIENT PROPERTY CREDIT

Liberty Tax Service reminds you that for eligible property placed in service during 2007 you can claim a credit of 30% of the cost of certain energy efficient property. The non-business energy property credit and 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, condominiums, and qualifying manufactured homes. The credit covers costs and labor for installing insulation, storm windows and doors, electric heat pump water heaters, electric heat pumps, geothermal heat pumps, central air conditioners, and natural gas, propane, or oil water heaters. 

MEDICAL EXPENSES

Liberty Tax Service reminds you not to overlook medical deductions for which you qualify. Hearing aids, eyeglasses, contact lenses, hospital fees for nursing, physical therapy, lab tests, and x-rays are all deductible. The mileage to and from a doctor's or dentist's office is deductible at 20 cents a mile, as are parking fees and tolls. You may also deduct mileage driven to fill prescriptions. Taxpayers who itemize can deduct non-reimbursed medical expenses that they paid during the year if these exceed 7.5% of their adjusted gross income. 

INSTALLMENT PAYMENT PLAN

Liberty Tax Service reminds you that you may pay the taxes you owe in installments if you cannot pay the total amount to the IRS by the tax deadline.   If you are not currently paying by an installment plan, complete Form 9465, Installment Agreement Request, and attach it to the front of the return.  You should send as much of the payment as possible with the return in order to limit penalty and interest charges which will continue to accumulate until the tax is paid off.  Taxpayers who have already mailed or electronically filed their returns can mail Form 9465 to the appropriate IRS Service Center.  An IRS representative will contact you to discuss the situation and arrange the payments.

CHILD AND DEPENDENT CARE CREDIT

Liberty Tax Service reminds you that a credit for up to 35% of qualified child and dependent care expenses paid is available for taxpayers who pay childcare in order to work. Qualified expenses may be allowed for up to $3,000 for one eligible individual ($6,000 for two or more). Persons employed or looking for work, who must pay someone to care for dependents under age 13 or for a qualified disabled person, may be able to take this credit.

SPLIT DIRECT DEPOSIT OPTION

Liberty Tax Service reminds you that that you can have your refund direct-deposited in up to three different banks or financial institutions.  Taxpayers can use the direct deposit line on the Form 1040 to specify a deposit to one institution. For more than one financial institution, taxpayers should use new Form 8888, Direct Deposit of Refund to More Than One Account.

DEDUCTIBLE MILEAGE RATES

Liberty Tax Service reminds you that the standard business mileage rate is 48.5 cents per business mile driven in 2007, and will increase to 50.5 cents in 2008.  The deductible amount for mileage driven during a move and/or for medical purposes is 20 cents per mile in 2007, and will be 19 cents per mile in 2008. Charitable mileage is deductible at 14 cents per mile in 2007 and remains the same in 2008. Be sure that you document this mileage by keeping a written record.

EARNED INCOME CREDIT (EIC) AND MILITARY COMBAT PAY
 
Liberty Tax Service 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.  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.

TAX BREAK FOR ELIGIBLE EDUCATORS

Liberty Tax Service reminds you that eligible educators who spend their own money on classroom supplies may qualify for a tax break. 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.  This adjustment has been extended through the 2007 tax year.