2007 Tax Return - Generous Hope and lifetime credit from uncle sam

By: Robert A. Johnson

Thanks to adjustments in inflation, some educational tax breaks now have a slightly more generous income-eligibility level. In the first two years of vocational school or college, the Hope Credit will be able to help the parents with the cost of higher education provided that the student meets certain requirements. The Hope Credit is worth up to $1,650 per student.

Am I Eligible?

If your dependent child is planning to attend college, you are able to claim the Hope Credit if your dependent child is:

• Enrolled in 1 of first 2 years of college – generally freshman and sophomore years.

• Enrolled in a program leading to a certificate, degree, or other recognized educational credit

• Taking at least ½ of the normal full-time workload for their particular course of study during one academic period in 2007.

• Free of felony convictions for either the possession or sale of illegal substances at the end of the school year of 2007.

• Did not have any expenses that were used in figuring a Hope Credit for more than 1 previous tax year. You are not allowed to claim the Hope Credit if:

• The modified adjusted gross income, or MAGI, is over $57,000 or, if you are filing jointly the MAGI must be $114,000 or more.

• You are married and are filing separately.

Lifetime Learning Tax Credit

If you want to know if you will be able to utilize the Lifetime Learning Tax Credit, you may be able to if:

• Your MAGI is between $47,000 and $57,000 if you are filing as a single taxpayer,

• Your MAGI is between $94,000 and $114,000 if you are filing a joint tax return.

You are not permitted to file a Lifetime Learning Tax Credit because your MAGI is $57,000 or more. It must be $117,000 or more if you are planning to file a joint tax return.

Eligibility

You can usually claim the Lifetime Learning Tax Credit when you are paying qualified tuition and other related expenses of a college education for an eligible student who is your spouse, yourself, or a dependent if you are able to claim him or her as an exemption. You do not have a limit of the number of years for which you are eligible for the Lifetime Learning Tax Credit. You are not able to claim this credit if your tax filing status happens to be married filing a separate return. You may be able to claim the Lifetime Learning Tax Credit on your tax returns of up to $2,000 for not only qualified tuition but also for other related expenses per family. This credit reduces the amount of tax that you may have to pay Uncle Sam.

Eligible Educational Institutions

These eligible institutions are any university, vocational school, college or another postsecondary education institution that is able to participate in various student aid programs that are administered by the U.S. Department of Education

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.