A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers who are enrolled in a High Deductible Health Plan (HDHP). This savings account is set up exclusively for paying the qualified medical expenses of the account beneficiary or their spouse and/or dependents. Taxpayer’s contributions are deductible from AGI. Contributions made by an employer are excluded from income and not subject to employment taxes. In 2007, the contribution limit is $2,850 for self-only and $5,650 for family coverage (if age 55 or older you are allowed a “catch-up” contribution of $800). In 2008, the rates increase to $2,900 and $5,800, repectively, with a $900 “catch-up” contribution.
AMT Relief
Although it was originally enacted to make sure that wealthy individuals did not escape paying taxes, the AMT has wound up affecting many middle-income taxpayers. One reason is that many of the tax figures for regular tax have been adjusted for inflation while the figures used for AMT have not. For 2007 only, a new law provides a temporary fix for the AMT tax by permitting a larger expemption. However, after 2007, the maximum AMT exemption will drop to the 2000 amounts unless Congress provides another fix.
Ohio Commercial Activity Tax & Personal Property Tax
Commercial Activity Tax (CAT Tax) is being phased in to partially offset revenue lost from other tax cuts. The rate will increase to .208%, effective April 1, 2008. (CAT Tax returns are due February 11, 2008 for annual filers.) In 2008, personal property will be assesed at 6.35% of true value, down from 12.5% in 2007. In 2009, personal property assessments will be zero for most businesses.
Corporate Franchise Tax
This tax is phasing out and corporate taxpayers only pay 40% of the calculated tax liability in 2007. Next year's tax will be 20% of the calculated liability. This tax will be fully phased out for most taxpayers in 2009.
IRA Deduction Expanded
The 2007 IRA deduction is $4,000 ($5,000 if age 50 or older at the end of 2007). A taxpayer may be able to take an IRA deduction if the taxpayer was covered by a retirement plan and the taxpayer's modified adjusted gross income (AGI) is less than $62,000 ($103,000 if married filing jointly or qualifying widow(er)). In 2008, the amounts will increase to $5,000 and $6,000, respectively.
Elective Salary Deferrals Increased
The amount a taxpayer can defer under all elective salary deferral plans increased in 2007 to $15,500 ($10,500 if the taxpayer has a SIMPLE plan). The catch-up contribution limit for taxpayers 50 or older increased to $5,000 ($2,500 for SIMPLE plans). The contribution limits will remain the same for 2008.
Standard Mileage Rates
The 2007 standard mileage rate for business use of a vehicle is 48.5 cents. The 2007 rate for using a vehicle to get medical care or to move is 20 cents per mile. The charitable miles driven are 14 cents per mile for 2007. In 2008, the rates will increase to 50.5 cents per mile for business miles. Medical and moving miles will be reduced to 19 cents and charitable will remain the same.
Mortgage Insurance Deduction
Mortgage insurance premiums will be deductible through 2010 as part of mortgage interest. This is another relief provision for homeowners. The three requirements are (1) the insurance must be in connection with the home acquisition debt, (2) the contract must have been issued after 2006, and (3) the premiums must be paid during the year.
Hybrid Cars and Alternative Motor Vehicles
The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even
eliminating the taxpayer's tax obligation. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006. For more information click on the link below. http://www.irs.gov/newsroom/article/0,,id=157632,00.html
Qualified Production Activities Income Deduction
The Code Section 199 qualified production activities deduction went into effect in 2005 and can benefit many businesses. It provides a percentage deduction for the lesser of: (1) a taxpayer's qualified production activities income for the tax year, or (2) taxable income (or, for an individual, adjusted gross income), determined without regard to Code Section 199, for the tax year. In 2007, the rate increased to 6% and then will increase to 9% in 2009 and thereafter.
Car Donations
Beginning in 2005, the rules for car donations changed, making such donations less attractive. Previously, taxpayers could deduct the fair market value of cars donated to a charity. However, if the charity sells the car, a taxpayer's deduction is equal to the proceeds received by the charity. If the charity does not sell the car and instead uses the car in furthering its charitable purpose, the taxpayer may be entitled to deduct the vehicle's fair market value if certain conditions are met.
Residential Energy Tax Credits
The Energy Tax Credits are sectioned into three classes: Qualified Energy Efficiency Improvements, Residential Energy Property Expenditures, and Residential Energy Efficient Property Credit.
Check out the link for more details, click on Home Improvements.
For additional info on product certification check out GAMA.
