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Participate in an employee benefit plan.The closing months of the year are often "open enrollment" periods for employee benefit plans that can reduce your taxes for next year, if not this one. Making the choice now to pay for health or dependent care expenses on a pre-tax basis and contributing to a 401(k) next year will directly lower your taxable income for 2007. Tax Guide 2008 Tax Planning Basics Tax planning is a process of looking at various tax options in order to determine when, whether, and how to conduct business and personal transactions so that taxes are eliminated or reduced. There are countless tax planning strategies available, particularly if you own a small business. For more details, read The Basics of Tax Planning. Tax News 2007 Social Security and Self-Employment Tax Rates The IRS is committed to doing more audits, and better audits, in an effort to clamp down on unreported and underreported income, known as the tax gap. But ultimately, audits alone are not the answer. For further details, please read Gov't Can't Audit Its Way Out of Tax Gap: IRS Official. New Standard Mileage Rates The IRS has released the new 2007 figures for determining various standard mileage rates for tax purposes. To learn more, please read Standard Mileage Rate Unveiled for 2007. Expired Tax Provisions With the 2006 tax year rapidly drawing to a close, this is a great time to do some last-minute tax planning. Of course, this assumes that you know all the tax rules needed to make informed decisions. Unfortunately, navigating through the tax world can be extremely difficult when important tax updates are unreasonably delayed. This certainly applies in the case of a number of important tax provisions that await legislative resurrection after expiring at the end of 2005. For more on this story, please read Failure to Renew Expired Tax Extenders Subject of Concern, Debate. Social Security Payments Increase Social Security taxes are on the rise, for some people at least. The amount of Social Security tax you'll be paying for 2007 may be higher than for 2006, depending on how much you make, but the actual tax rate really hasn't changed a bit. To learn more about the tax hike, please read Social Security, Self-Employment Taxes Set for 2007. Income Tax Preparation GainsKeeper Compatible Tax Tips Newsletter Continuing our effort to provide you with valuable tax information, we will periodically update this page with useful tips and information on issues that you commonly deal with. Sign up for our Free E-mail Newsletter E-mail Address: A New Tax Year Means New Tax Changes to Consider Like the weather, our tax laws are subject to frequent changes. Unfortunately, there continue to be many traps for the unwary and uninformed taxpayer. Here are some highlights of changes in effect for the 2006 filing season: Personal exemption amount. This amount has increased to $3, 300 per person for 2006. Standard deductions. Standard deduction amounts have increased for 2006 as follows: singles and married filing separately, $5, 150; heads of household, $7, 550; married filing jointly, $10, 300. State and local general sales tax deduction. Through the end of 2007, individual taxpayers may still elect to deduct either state and local income taxes or state and local general sales taxes as an itemized deduction on their federal income tax returns. Credit for federal telephone excise taxes paid. For 2006 only, individual taxpayers may request a telephone excise tax refund via their Form 1040. The standard refund amounts depend on the number of exemptions claimed and can be as high as $60 for four of more exemptions claimed. Tax Guide 2008 Deciding Who Must File an Income Tax Return If you're reading this material, you probably don't have any doubt about whether you need to file a tax return. To remove any residual doubts you may have, though, please read Who Must File a Return Choosing the Right Individual Income Tax Form When it comes to federal income tax forms, there are three basic versions available to individuals: Form 1040, Form 1040A, and Form 1040EZ. There are rules for each of these forms regarding the taxpayers who can or must use it. To find out which individual tax form applies to your situation, read Which Tax Form Should You Use Tax News Tax Return Changes Highlighted Taxpayers will notice some changes in filing their 2006 tax returns, and the IRS is trying to educate filers ahead of time. For further details, please read IRS Officials Highlight Tax Return Changes for Individuals. New Federal Tax Legislation The House of Representatives overwhelmingly approved comprehensive tax, healthcare and trade legislation on December 8, 2006, meeting an election year promise to extend a group of expiring tax provisions before the 109th Congress adjourns. For a closer look at the new tax law changes, please review Final Tax Package Extended; Congress Adjourns. New Options for IRA Funding When calculating your annual income taxes before the April 15 deadline, certain filers have the option of sheltering some additional income, tax-free, in an Individual Retirement Account (IRA). And even though the calendar has turned to a new year, that IRA contribution is considered valid for the tax year that just ended. But with all the holiday spending and likely increases in health coverage premiums for the new year, where do you actually find the money to make that tax-advantageous IRA investment Thanks to new federal legislation, you may have another source for funding your deposit--your tax refund. For more on the new tax law changes, take a look at New Pension Law Allows Tax Return-Funded IRAs. Tax Audits Discussed The IRS is committed to doing more audits, and better audits, in an effort to clamp down on unreported and underreported income, known as the tax gap. But ultimately, audits alone are not the answer. For further details, please consult Gov't Can't Audit Its Way Out of Tax Gap: IRS Official. Tax News Archive For more news stories and features on federal, state and payroll tax issues and how they may affect you, read the listing of articles in the archive. Tax Tips Newsletter Archive To read newsletters from previous months, browse the Tax Tips Newsletter Archive. CompleteTax Advantages Income Tax Preparation GainsKeeper Compatible Tax Tips Newsletter Continuing our effort to provide you with valuable tax information, we will periodically update this page with useful tips and information on issues that you commonly deal with. Sign up for our Free E-mail Newsletter E-mail Address: Remember to Love Thy Spouse This Tax Season If you were to believe the candy and greeting card industries, February is the month to celebrate love. It seems appropriate, therefore, that this month we consider how love and marriage and taxes go together. Tax Guide 2008 Tax Credits and Other Issues for Families Closely related to the discussion of marital status, there are a number of special tax breaks based on your family situation. For more on this topic, please read Tax Credits and Other Issues for Families. Deciding Who Must File an Income Tax Return If you're reading this material, you probably don't have any doubt about whether you need to file a tax return. To remove any residual doubts you may have, though, please read Who Must File a Return Choosing the Right Individual Income Tax Form When it comes to federal income tax forms, there are three basic versions available to individuals: Form 1040, Form 1040A, and Form 1040EZ. There are rules for each of these forms regarding the taxpayers who can or must use it. To find out which individual tax form applies to your situation, read Which Tax Form Should You Use Tax News Tax Filing Deadline Extended

You can deduct taxes on all your real estate - your deduction is not limited to only two principal residences, as it is with the home mortgage interest deduction. Real estate taxes you paid on all real estate you own for personal or family purposes is deductible on Line 6 of Schedule A, Itemized Deductions. However, if you own commercial or residential rental real estate, the taxes would be deducted on your Schedule E, Supplemental Income and Loss or on Form 4835 for farms, not Schedule A. See also our discussion of multi-use real estate property that is rented out some of the time, and used for personal purposes at other times. credit pacific service union

Deductible taxes do not include charges for services performed, such as a unit fee for water consumed or a periodic fee for trash removed. Taxes also don t include assessments for local benefits that tend to increase the value of your property, such as for the construction of streets, sidewalks, or sewers. Any such charges must be added to the tax basis of your property - they ll eventually reduce the amount of taxable profit on your property when you sell. credit first service union

However, there is a distinction to be made between improvements and repairs. Assessments for repairs, such as repair of a broken sidewalk, or for maintenance, such as mowing, are deductible if the charges are broken out separately on your tax bill. card credit mobile service

Who gets the deduction

The general rule is that the person who owns the real estate and, therefore, owes the taxes is the person who can deduct them, provided that he or she actually paid the amounts. Co-owners should divide the tax bill and the deduction according to the percentage of their ownership interest. If you pay taxes for someone else (for example, your aged parent) on property that they own, you cannot deduct them. card credit discover service

However, if you are divorced and your separation agreement or divorce decree requires you to pay real estate taxes on property owned jointly by you and your ex-spouse, the amount you pay on the ex-spouse s portion may be deductible as alimony. credit public service union

• More detailed rules apply to condos and co-ops. card credit processing service

• You ll also want to be aware of the rules regarding when taxes are deductible. center credit service union

Buying a Home: CCH Tax Guide Income Tax Preparation GainsKeeper Compatible

Buying a Home If you bought a home in 2007, you ve undoubtedly been busy with a glut of activities including shopping for a house and a mortgage, negotiating the purchase price, moving, and setting up your household in a new location. You can add to this list of duties one fairly simple, but important task: collecting and retaining the records that show the basis of your home. The next few sections will explain the ins and outs of keeping this important information. card credit service wireless

• reasons for tracking your basis
• computing your initial basis
• adjustments to your home s basis

Selling Your Home: CCH Tax Guide Income Tax Preparation GainsKeeper Compatible

Selling Your Home Because of changes to the tax laws that went into effect in May of 1997, most homeowners will be exempt from paying tax on gains from the sale of their main home. More specifically, you may be able to exclude up to $250, 000 in gains when you sell your home, provided that you have both owned and used your home as a principal residence for at least two of the five years immediately preceding the sale (five years minimum ownership for sales and exchanges after October 22, 2004, if the residence was acquired in a like-kind exchange). credit security service union

Married couples can exclude up to $500, 000 in gains if they file a joint return, provided that both spouses meet the two-year use test, at least one spouse can meet the two-year ownership test, and neither spouse has excluded gain from the sale of another home in the last two years (counting sales since May 6, 1997). credit report service

To take advantage of this exclusion, you need to know: blogspot com christian

• what period of ownership and use means christian counseling credit

• how to calculate gains on the sale credit federal service union

• how to report gains on the sale credit monitoring service

• how to handle a home that was used partially for business credit division service

• rules illustrated in our case study for partially residential property card credit online service

As a reminder, losses on the sale of your personal residence are not deductible. There is an exception to this rule if part of your home was rented out or used for a home office, or your home was converted to a rental property before you sold it. In any case, only losses on the business portion of the home would be deductible. Also see our discussion of sales of rental or commercial real estate. consumer counseling credit inc

Vacation Home Rentals: CCH Tax Guide Income Tax Preparation GainsKeeper Compatible

Vacation Home Rentals A second home in the country, a condo in the city, or a houseboat on the lake can all be a pleasant place to spend your vacation. They can also be made to partially pay for their own costs, if you can rent them out to others for at least a few days or weeks each year. The IRS basically uses a two-week de minimus rule. If you rent out a vacation home for two weeks or less during the year, you don t have to report any rental income you receive, but you can t deduct any rental expenses you have (except for the normal home mortgage interest and real estate tax deductions you d have anyway). Essentially the IRS will ignore this small amount of rental activity. card credit fleet service

If you have property that is rented out for more than 14 days during the year, and you or your family, or any co-owner or his or her family, use it for personal purposes for even one day of the year, you have to divide all the expenses of the property into two buckets: personal and rental. card consolidation credit

The rental expenses will generally be deductible on Schedule E, Supplemental Income and Loss, and the personal expenses will not be deductible except for mortgage interest, real estate taxes, and casualty losses that you could ordinarily claim on Schedule A. credit free online report

On Schedule E you can deduct the entire amount of expenses that apply only to renting, such as advertising, commissions, credit checks, etc. For all expenses that apply to the entire home, such as mortgage interest, real estate taxes, insurance, utilities, and repairs and maintenance on the furnace, roof, electric system, etc., you must generally divide the expenses on the basis of days spent for personal use, compared to days that the property was rented at a fair market rate; the total need not add up to 365 days. credit federal first service

When counting days of personal use, you must include any days that you donated the use of your property to a charitable organization (for example, if you allowed a charity to auction off a week in your lakefront house). Also count as personal any days that you traded with someone else for the use of a different property, or any days for which you charged less than fair market rent. However, don t count as personal the days you stayed in the home because you were having repairs or maintenance done, even if your family stayed with you. consumer credit service

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