2007 Tax Return - You Can Deduct PMI Mortgage Insurance Premium Deductions

By: Robert A. Johnson

If you are a homeowner and bought a house in 2007, you can deduct PMI (Private Mortgage Insurance) on your yearly taxes. The Internal Revenue Service has added a line on Form 1098 that you received from your mortgage lender that shows how much mortgage insurance you paid in 2007.

As an example, if you bought a house in 2007 and made a down payment of less than 20%, you are probably paying for mortgage insurance. If your income is $100,000 or less, you can now deduct your entire private mortgage insurance expense or PMI, or other mortgage insurance you purchased through the Veterans Association, Federal Housing Administration or Rural Housing Administration.

This PMI deduction is important in filing your 2007 tax return or 2007 late tax return. Homeowners can even state this deduction and note it as a prior year tax deduction. Remember, however, that the 2007 PMI deduction will phase out once your adjusted gross income reaches $110,000. Basically, if any homeowner puts down less than 20%, they are considered a mortgage risk. Mortgage and finance companies are utilizing piggyback loans and private mortgage insurance to ensure their risk.

A piggyback loan example would be something like this. Say you bought a house for $100,000 and received a mortgage loan in 2007 for $80,000 and were only able to put down $10,000. The other $10,000 you need was in essence a second mortgage or piggyback loan. In prior tax years if you had a standard mortgage and a piggyback mortgage, you could deduct the interest you paid on both mortgages, but not your PMI. This changed for 2007 with some restrictions.

The 2007 tax deductions for PMI are only applicable to mortgages that closed in tax year 2007. You would have to refinance your home in 2007 if your loan closed in 2006 to qualify for the PMI tax deduction. There are also some income restrictions—your 2007 adjusted gross income must be $100,000 or lower. For homeowners who have standard mortgages and piggyback loans, this tax law only applies for the 2007 tax year. The likelihood of Congress renewing this 2007 PMI tax deduction remains unknown.

To find out if you qualify for the 2007 PMI tax deduction, check with your accountant or follow the guidelines on the tax software you use at home. In the long run, experts say that homeowners should stay away from piggyback loans; however, the upside to this is that insurance premiums will most likely go down in the coming years.

Don’t lose your rebate check or stimulus check

By: Robert A. Johnson

President Bush signed the 2007 economic stimulus package, what does that mean for you? For starters it could mean a tax-free check for you to spend anyway you see fit. The estimates are the minimum check will be three hundred for single person and twelve hundred for couples. With an additional three hundred dollars possible for each eligible child. “Great,” you may be thinking, “where do I sign up?” Well, you don’t, at least not exactly.

How to Get Your Stimulus

The only way to receive your 2008 economic stimulus check is to file a 2007 tax return. For most people that will not be a problem, if you work at all in this country you should make enough that you are required to file a tax return each year. However, there are a few folks who slip through the cracks on this one and need to be aware of what they should do.

Social Security

If you draw social security, you could still qualify for the 2008 stimulus check. What you will need to do is either go into the office of a local tax preparation office or, if you are internet savvy, go online to the IRS website and view the list of providers offering free tax filing for people whose income falls below $54,000 a year. If you are going into the office, take with you the 1099 the Social Security Department sends out each year showing how much you drew. One important note; some people receive supplemental security income or SSI, this is not eligible income for rebate check purposes.

Low Income

The federal guidelines say that if you make less than $8,750 per year for singles and $11,250 you do not have to file a tax return. Well for the economic stimulus check, you had to make at least $3,000. That means if you previously fell in one of the first two categories you more than likely did not file. So in order to receive your check you are going to need to file before a 2007 income tax return before October 15th deadline. Update, if you still have not filed a tax return you will be able to file a late return in January and still receive an economic stimulus check if you are eligible.

Income Tax Return

Many may be concerned that by filling out a tax return they will have to pay taxes normally not assessed to them. This is not the case the only reason you must file one is to assess your eligibility for the stimulus check and determine exactly how much it will be.

EIC is here to stay

By: Robert A. Johnson

EIC (Earn Income Credit) is here to stay.

The earned income credit is for the low to moderate income individual or couple. This is a credit you can take to reduce or eliminate the amount of tax you owe. In some cases, it also provides a healthier return. Unlike some other credits you can receive on your tax return, this is one of the few that is refundable. In other words if you have very little or no tax to reduce you will receive the balance of the EIC on your federal return.

Income Qualifications

To qualify for the earned income credit you must have either children or an income that falls below a certain level. For instance, a single person with an income of under $12,590 they can receive up to $428. This of course will be calculated according to their exact income on the basis of income times 7.65% for incomes up to $6,999 when the credit begins to phase out.

For families with children the qualifications become more complex. Below is a sample break down of the maximum benefit:

- One qualifying child will equal $2,853
- Two qualifying children equals $4,716
- No children $428

Now keep in mind these are the maximum benefit amounts and will be affected by your gross income. These numbers are up from the previous year by anywhere from one thousand to two thousand dollars of earned income. It is prudent to double-check your 2007 tax return for any errors that may have occurred. Alternatively, if you are filing late you need to know all the possible deductions and credit changes that were made for the 2007 tax filing year.

Qualifying Child

To get the maximum EIC that you are entitled to you need to also be aware of what constitutes a qualifying child. There are situations where this can be complicated as in the case of an aunt or uncle claiming a niece or nephew. However the federal guidelines are:

1. - Age- According to the IRS website under age 19 at the end of 2007, A full-time student under age 24 at the end of 2007, or permanently and totally disabled at any time during 2007, regardless of age.

2. Relationship- A child may be your daughter, son, stepdaughter, stepson, grandchild, great-grandchild, sister, brother, stepsister, stepbrother, half sister, half brother, niece, nephew, great niece, great nephew or any descendant of the above listed. In some cases, foster children and adoptive children are also qualifying children, provided they are placed with you by a court.

3. Residence- Your child of course must be a resident of the United States except for temporary absences due to school, jail, hospital or other stays outside the country that are considered to be temporary, case in point military service.

This is a break down of the main components of claiming the EIC credit for the 2007 tax year. There are other special instances that may fall outside these qualifications. Always check for the most current updates when filing current or prior year’s tax returns.

Don’t overlook the adoption credit in the 2007 tax return

By: Robert A. Johnson

Adoption is near and dear to my heart, as I was an adopted infant. I have researched adopting hard to place kids, and was happy to find that with some of the struggles that are unique to adopted families, the expense of bringing that dream home is offset with a tax credit. While the cost of raising a child cannot be calculated to make it financially profitable, having a tax adoption credit available makes adoption much more achievable for many families that long for a child. If you have started the adoption process, you know the costs associated can be overwhelming.

The tax laws for adoption credit are fairly generous. Any direct expenses, such as travel, attorney, court and other legal costs, are deductible. The adopting parent (s) can claim an adoption credit of up to $11,650 for 2008 for each eligible child. In order to qualify for this, you must have paid for adoption expenses out of your own pocket, any you must have adopted an eligible child. This means any child 17 or younger, or any US citizen or resident alien who is physically or mentally unable to care for themselves.

For adopting parents who adopt a special needs child, the full amount of the adoption credit can be claimed, regardless to what year the adoption became final. For children who are US citizens, you may take the adoption credit in the year after your expenses were paid (if the adoption was not final), or the same year if it was finalized. For foreign adoptions, the tax credit is only available the year the adoption was finalized. You must get an Adoption Taxpayer ID number if no Social Security number is issued.

The max dollars you claim for this credit is limited by your actual expenses as well as the phase out range for income. If you had one failed adoption attempt, you can write off your expenses for both processes once you have a finalized adoption. If you are filing a prior tax return, or any 2007 tax form, it would be best to hire an accountant with expertise in this tax credit area to make sure you get your full tax credit if you have adoption expenses. There are some expenses you can’t claim with this credit, such as surrogate mother expenses, so make sure you are doing things right.

This is encouraging for families who want to find a way to make a difference in the lives of a child, or to add to their family. Adoption is a beautiful gift, and now you can find a way to afford it. Don’t limit yourself to where you find that perfect addition. The different states often have children available that need a family, and it is much less expensive than overseas adoption. If you want to go overseas, though, the incentives on your taxes take the sting out of the money it costs. There is no way to put a price on your child, so go change a child’s world, and the 2007 tax adoption credit will help you do it.