Tax relief due to foreclosures. There were certainly no shortages of foreclosures in 2007, and it looks like we'll be seeing the same kind of troubles this year and into 2009.
The positive news (if you can really call it that) applies to any foreclosures in 2007, 2008 and 2009. That is, any forgiven debt during those years in connection with a foreclosure, short sale or loan restructuring will not be treated as income, as it has in years past. There are a few restrictions, however:
This relief applies only to principal residences and not vacation home or investment property. (In most of those latter cases, the amount of debt canceled is considered taxable income.)
The tax basis of the home is reduced by the amount of canceled debt excluded from income.
Increased Section 179 expense deduction. If you own your own business that requires that you
to purchase heavy equipment, this deduction
allows you to elect to deduct all or part of the
cost of certain qualifying property in the year
you place it in service. And thanks to a new
law, the maximum amount of equipment that
businesses can expand increases to
$125,000 — a whopping $17,000 increase
from 2006.
The qualifying property must have been placed
in service in 2007 and includes only
depreciable and tangible personal property
such as trucks, machinery and computers. Real property, such as buildings and their structural components, does not qualify. Also excluded from the deduction are land and improvements made directly to the land.
 |
 |
 |
 |
 |
|
 |
 |
 |
Tax-free parking for employees. If you're employed and your employer pays for your parking, you now have up to $215 a month in non-taxable employer-paid parking. That's up $10 per month from 2006 and can save you over $2,500 in taxable income. Also, the cap on tax-free transit passes that employers can give went up to $110 a month. That's another $1,200 per year savings.
Increased contribution limit for 401(k) plans. You can now contribute $15,500 to your 401(k) and other similar workplace retirement plans. This is up from $15,000 in 2006. By the way, if you're 50 or older, the limit rises to $20,500 — also a $500 increase.
Bigger health care deductions. If you have a health savings account (HSA), the maximum HSA deduction increases to $2,850 for singles or $5,650 for family coverage. That's up $185 and $200, respectively. And those ages 55 or older can add $800 on top of that.
Interested to see how you can apply some of these updated deductions and contributions to your 2007 return? Try our quick and easy-to-use Federal Income Tax Estimator and plug in your estimated total for itemized deductions and exemptions… and let the calculator do the rest. Check it out here.
And if you're not quite sure whether you should itemize or take the standard deduction, we also have a calculator to help you figure out which way is best depending on your own unique situation. Click here to try this calculator.
So that's the good news for this year. However, EVERY year millions of people still overpay their taxes. And that's mainly because they've missed at least ONE of the following…
 |
|
