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 - What is the Mortgage Forgiveness Debt Relief Act of 2007?

By: Robert A. Johnson

With so many people finding themselves facing foreclosure the American government finally stepped in to help out a little. Although nothing could be done about saving the homes, there was The Mortgage Forgiveness Debt Relief Act of 2007 which was enacted on December 20, 2007.

What this means is that some or all of the debt that is left from a foreclosure can be forgiven for the 2007 tax return and the following two years. Before this act was passed, any debt that was left after the foreclosure of a home was basically considered taxable income and had to be claimed on that year’s income taxes.

This act only applied to debt that was obtained due to the purchase of a person principal residence or to improve the residence. The Mortgage Forgiveness Debt Relief Act of 2007 applies to the 2007 tax return along with the 2008 and the 2009 tax return. When people had to file 2007 taxes they still had to report the debt on their tax return. The form 982 has to be filed out and attached to the rest of your 2007 tax return.

Form 982 will have to be filed out for those who are filing for this relief on their 2008 and 2009 taxes. The form can be easily obtained by downloading it from IRS.gov. It is also good to know that as long as the loan amount that you are seeking help on was less then two million dollars it will be covered. If married couples are filing separately then it is one million dollars.

Just keep in mind that this form and this act cannot be used for second homes or rentals that a person had which were foreclosed on. There can be extensions on your 2007 tax return filed though in order to give extra time to pay the taxes on that debt since it is likely to be a good amount of money.

While this doesn’t solve the problem of not having a home any longer, it is at least a good amount of help to make sure those who lost their homes have an easier time moving on as they will not have to pay taxes on that debt.

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 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.