While I read all the links previously posted may I ask the question
Did you itemize? If not you may have overpaid IRS!!!
Every year, as many as 2 million people pay too much in taxes by taking the standard deduction. Are you one of them? Here's what to do.
If you took the standard deduction on your 2006 tax return, you may want to take another look. You might have cheated yourself out of some tax savings. In fact, you may even want to look at your 2005 and 2004 returns as well.
In the past, the General Accounting Office has found that filers who used the standard deduction instead of itemizing paid the Internal Revenue Service almost $1 billion more than they should have.
Taxpayers have a choice of which deduction method they use to reduce taxable income, standard or itemized. They may claim whichever amount is larger.
The standard deduction amount is established annually. It is based on a taxpayer's filing status and is listed on each of the individual tax-return forms -- 1040, 1040A and 1040EZ. This deduction generally is taken by taxpayers who don't have many expenses.
For your 2006 return, it is $10,300 for married couples filing jointly and $5,150 for singles and married taxpayers filing separately. It's $7,550 for heads of households.
For 2007, the standard deduction rises to $10,700 for married couples filing jointly and $5,350 for singles and married couples filing separately. It's $7,850 for heads of households.
Itemized deductions are calculated from allowable expenses that a taxpayer tracks throughout the tax year. They are reported on Schedule A, with some amounts limited by a filer's income. While it takes more work, itemizing taxpayers often find the effort pays for itself through a lower tax bill.
Itemizing filers, however, are consistently in the minority. Critics of the tax code say this is because many people choose to forgo savings for simplicity. Using the standard deduction, regardless of the tax costs, means you can end your annual tax involvement sooner.
You can see the standard deductions and other tax adjustments for 2007 below.
Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.602: Tax forms and instructions.
(Also Part I, §§ 1, 23, 24, 25A, 25B, 32, 42, 59, 62, 63, 68, 132, 135, 137, 146, 148,
151, 170, 179, 213, 219, 220, 221, 223, 408, 512, 513, 685, 877, 911, 2032A, 2503,
2523, 4161, 4261, 6033, 6039F, 6323, 6334, 6601, 7430, 7702B; 1.148-5)
Rev. Proc. 2006-53
Table of Contents:
SECTION 1. PURPOSE
SECTION 2. CHANGES
SECTION 3. 2007 ADJUSTED ITEMS
Code Section
.01 Tax Rate Tables 1(a)-(e)
.02 Unearned Income of Minor Children Taxed as if Parent's 1(g)
Income ("Kiddie Tax")
.03 Adoption Credit 23
.04 Child Tax Credit 24
.05 Hope and Lifetime Learning Credits 25A
.06 Elective Deferrals and IRA Contributions by Certain Individuals 25B
.07 Earned Income Credit 32
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.08 Low-Income Housing Credit 42(h)
.09 Alternative Minimum Tax Exemption for a Child Subject to the 59(j)
"Kiddie Tax"
.10 Transportation Mainline Pipeline Construction Industry Optional 62(c)
Expense Substantiation Rules for Payments to Employees under
Accountable Plans
.11 Standard Deduction 63
.12 Overall Limitation on Itemized Deductions 68
.13 Qualified Transportation Fringe 132(f)
.14 Income from United States Savings Bonds for Taxpayers Who 135
Pay Qualified Higher Education Expenses
.15 Adoption Assistance Programs 137
.16 Private Activity Bonds Volume Cap 146(d)
.17 Safe Harbor Rules for Broker Commissions on Guaranteed 148
Investment Contracts or Investments Purchased for a Yield
Restricted Defeasance Escrow
.18 Personal Exemption 151
.19 Election to Expense Certain Depreciable Assets 179
.20 Eligible Long-Term Care Premiums 213(d)(10)
.21 Retirement Savings 219
.22 Medical Savings Accounts 220
.23 Interest on Education Loans 221
.24 Health Savings Accounts 223
.25 Roth IRAs 408A
.26 Treatment of Dues Paid to Agricultural or Horticultural 512(d)
Organizations
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.27 Insubstantial Benefit Limitations for Contributions Associated 513(h)
with Charitable Fund-Raising Campaigns
.28 Funeral Trusts 685
.29 Expatriation to Avoid Tax 877
.30 Foreign Earned Income Exclusion 911
.31 Valuation of Qualified Real Property in Decedent's Gross Estate 2032A
.32 Annual Exclusion for Gifts 2503 & 2523
.33 Tax on Arrow Shafts 4161
.34 Passenger Air Transportation Excise Tax 4261
.35 Reporting Exception for Certain Exempt Organizations with 6033(e)(3)
Nondeductible Lobbying Expenditures
.36 Notice of Large Gifts Received from Foreign Persons 6039F
.37 Persons Against Whom a Federal Tax Lien Is Not Valid 6323
.38 Property Exempt from Levy 6334
.39 Interest on a Certain Portion of the Estate Tax Payable 6601(j)
in Installments
.40 Attorney Fee Awards 7430
.41 Periodic Payments Received under Qualified Long-Term Care 7702B(d)
Insurance Contracts or under Certain Life Insurance Contracts
SECTION 4. EFFECT ON OTHER DOCUMENTS
SECTION 5. EFFECTIVE DATE
SECTION 6. DRAFTING INFORMATION
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SECTION 1. PURPOSE
This revenue procedure sets forth inflation adjusted items for 2007.
SECTION 2. CHANGES
.01 Under § 25B eligible individuals are allowed a credit against tax equal to the applicable percentage of qualified retirement savings contributions of the individual that do not exceed $2,000. Section 833(a) of the Pension Protection Act of 2006, Pub. L.
No. 109-280, 120 Stat. 780 (2006)(PPA), added § 25B(b)(3), which provides that the adjusted gross income amounts in § 25B(b) used to determine the applicable percentage for calculating the credit are adjusted for inflation. (See section 3.06 of this revenue procedure.)
.02 Section 219(a) allows individuals to deduct qualified retirement contributions for a taxable year. Section 833(b) of the PPA added § 219(g)(8), which provides that the applicable dollar amount under § 219(g)(3)used to determine the amount of reduction for the limitation on deduction for taxpayers who are active participants and for spouses who are not active participants in certain pension plans is adjusted for inflation. (See section 3.21 of this revenue procedure.)
.03 Section 408A(c) provides rules for the tax treatment of contributions made to Roth IRAs. Section 833(c) of the PPA added § 408A(c)(3)(C), which provides that the applicable dollar amount under § 408A(c)(3) used to determine the dollar limit, based on modified adjusted gross income, for the contribution limit to Roth IRAs is adjusted for inflation. (See section 3.25 of this revenue procedure.)
.04 Q&A 14 of Rev. Proc. 2002-41, 2002-1 C.B. 1098, provides an inflation
- 5 - adjustment method for the hourly rates used to determine the amounts deemed substantiated for payments made by transportation mainline pipeline construction employers under accountable plans. (See section 3.10 of this revenue procedure.)
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Q&A 14 is modified to read as follows:
Q-14. Will the amount deemed substantiated under this revenue procedure be
adjusted for inflation?
A-14. Yes. For calendar years after 2006, the hourly rate will be adjusted
annually for inflation under § 1(f)(3), except that the base year for such adjustment will be calendar year 2002 and any adjustment will be rounded to the nearest dollar. Any adjustment to the rates provided in this revenue procedure will be published annually.
SECTION 3. 2007 ADJUSTED ITEMS
.01 Tax Rate Tables. For taxable years beginning in 2007, the tax rate tables under § 1 are as follows:
TABLE 1 - Section 1(a). - Married Individuals Filing Joint Returns and Surviving Spouses If Taxable Income Is: The Tax Is:
Not over $15,650 10% of the taxable income.
Over $15,650 but $1,565 plus 15% of
not over $63,700 the excess over $15,650
Over $63,700 but $8,772.50 plus 25% of
not over $128,500 the excess over $63,700
Over $128,500 but $24,972.50 plus 28% of
not over $195,850 the excess over $128,500
Over $195,850 but $43,830.50 plus 33% of
not over $349,700 the excess over $195,850
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Over $349,700 $94,601 plus 35% of the excess over $349,700
TABLE 2 - Section 1(b). - Heads of Households
If Taxable Income Is: The Tax Is:
Not over $11,200 10% of the taxable income
Over $11,200 but $1,120 plus 15% of
not over $42,650 the excess over $11,200
Over $42,650 but $5,837.50 plus 25% of
not over $110,100 the excess over $42,650
Over $110,100 but $22,700 plus 28% of
not over $178,350 the excess over $110,100
Over $178,350 but $41,810 plus 33% of
not over $349,700 the excess over $178,350
Over $349,700 $98,355.50 plus 35% of
the excess over $349,700
TABLE 3 - Section 1(c). - Unmarried Individuals (other than Surviving Spouses and Heads of Households).
If Taxable Income Is: The Tax Is:
Not over $7,825 10% of the taxable income
Over $7,825 but $782.50 plus 15% of
not over $31,850 the excess over $7,825
Over $31,850 but $4,386.25 plus 25% of
not over $77,100 the excess over $31,850
Over $77,100 but $15,698.75 plus 28% of
not over $160,850 the excess over $77,100
Over $160,850 but $39,148.75 plus 33% of
not over $349,700 the excess over $160,850
Over $349,700 $101,469.25 plus 35% of
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the excess over $349,700
TABLE 4 - Section 1(d). - Married Individuals Filing Separate Returns
If Taxable Income Is: The Tax Is:
Not over $7,825 10% of the taxable income
Over $7,825 but $782.50 plus 15% of
not over $31,850 the excess over $7,825
Over $31,850 but $4,386.25 plus 25% of
not over $64,250 the excess over $31,850
Over $64,250 but $12,486.25 plus 28% of
not over $97,925 the excess over $64,250
Over $97,925 but $21,915.25 plus 33% of
not over $174,850 the excess over $97,925
Over $174,850 $47,300.50 plus 35% of
the excess over $174,850
TABLE 5 - Section 1(e). - Estates and Trusts
If Taxable Income Is: The Tax Is:
Not over $2,150 15% of the taxable income
Over $2,150 but $322.50 plus 25% of
not over $5,000 the excess over $2,150
Over $5,000 but $1,035 plus 28% of
not over $7,650 the excess over $5,000
Over $7,650 but $1,777 plus 33% of
not over $10,450 the excess over $7,650
Over $10,450 $2,701 plus 35% of
the excess over $10,450
.02 Unearned Income of Minor Children Taxed as if Parent's Income (the "Kiddie Tax"). For taxable years beginning in 2007, the amount in § 1(g)(4)(A)(ii)(I), which is
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used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $850. This amount is the same as the $850 standard deduction amount provided in section 3.11(2) of this revenue procedure. The same $850 amount is used for purposes of § 1(g)(7) (that is, to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie").
For example, one of the requirements for the parental election is that a child's
gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child's gross income for 2007 must be more than $850 but less than $8,500.
.03 Adoption Credit. For taxable years beginning in 2007, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $11,390. For taxable years beginning in 2007, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $11,390. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $170,820 and is completely phased out for taxpayers with modified
adjusted gross income of $210,820 or more. (See section 3.15 of this revenue
procedure for the adjusted items relating to adoption assistance programs.)
.04 Child Tax Credit. For taxable years beginning in 2007, the value used in
§ 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $11,750.
.05 Hope and Lifetime Learning Credits.
(1) For taxable years beginning in 2007, the Hope Scholarship Credit under
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§ 25A(b)(1) is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $1,100 plus 50 percent of those expenses in excess of $1,100, but not in excess of $2,200. Accordingly, the maximum Hope Scholarship Credit allowable under § 25A(b)(1) for taxable years beginning in 2007 is $1,650.
(2) For taxable years beginning in 2007, a taxpayer's modified adjusted gross
income in excess of $47,000 ($94,000 for a joint return) is used to determine the reduction under § 25A(d)(2)(A)(ii) in the amount of the Hope Scholarship and Lifetime Learning Credits otherwise allowable under § 25A(a).
.06 Elective Deferrals and IRA Contributions by Certain Individuals. For taxable years beginning in 2007, the applicable percentage under § 25B(b) is determined based onthe following amounts:
Modified Adjusted Gross Income
Joint Return Head of Household All Other Cases Applicable
Over Not Over Over Not Over Over Not over Percentage
$ 0 $31,000 $ 0 $23,250 $ 0 $15,500 50%
$31,000 $34,000 $23,250 $25,500 $15,500 $17,000 20%
$34,000 $52,000 $25,500 $39,000 $17,000 $26,000 10%
$52,000 $39,000 $26,000 0%
.07 Earned Income Credit.
(1) In general. For taxable years beginning in 2007, the following amounts are used to determine the earned income credit under § 32(b). The "earned income amount" is the amount of earned income at or above which the maximum amount of the earned
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income credit is allowed. The "threshold phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The "completed phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed.
Number of Qualifying Children
Item One Two or More None
Earned Income Amount $ 8,390 $11,790 $ 5,590
Maximum Amount of Credit $ 2,853 $ 4,716 $ 428
Threshold Phaseout Amount $15,390 $15,390 $ 7,000
(Single, Surviving Spouse, or
Head of Household)
Completed Phaseout Amount $33,241 $37,783 $12,590
(Single, Surviving Spouse, or
Head of Household)
Threshold Phaseout Amount $17,390 $17,390 $ 9,000
(Married Filing Jointly)
Completed Phaseout Amount $35,241 $39,783 $14,590
(Married Filing Jointly)
The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.
(2) Excessive investment income. For taxable years beginning in 2007, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $2,900.
.08 Low-Income Housing Credit. For calendar year 2007, the amounts used under
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§ 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing
credit is the greater of (1) $1.95 multiplied by the State population, or (2) $2,275,000.
.09 Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax." For taxable years beginning in 2007, for a child to whom the § 1(g) "kiddie tax" applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child's earned income for the taxable year, plus (2) $6,300.
.10 Transportation Mainline Pipeline Construction Industry Optional Expense
Substantiation Rules for Payments to Employees under Accountable Plans. For calendar year 2007, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $15 per hour for rig-related expenses that is deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41.
If the employer provides fuel or otherwise reimburses fuel expenses, up to $9 per hour is deemed substantiated if paid under Rev. Proc. 2002-41.
.11 Standard Deduction:
(1) In general. For taxable years beginning in 2007, the standard deduction
amounts under § 63(c)(2) are as follows:
Filing Status Standard Deduction
Married Individuals Filing Joint Returns $10,700
and Surviving Spouses (§ 1(a))
Heads of Households (§ 1(b)) $ 7,850
Unmarried Individuals (other than Surviving Spouses $ 5,350
and Heads of Households) (§ 1(c))
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Married Individuals Filing Separate $ 5,350
Returns (§ 1(d))
(2) Dependent. For taxable years beginning in 2007, the standard deduction
amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $850, or (2) the sum of $300 and the individual's earned income.
(3) Aged or blind. For taxable years beginning in 2007, the additional standard
deduction amount under § 63(f) for the aged or the blind is $1,050. These amounts are increased to $1,300 if the individual is also unmarried and not a surviving spouse.
.12 Overall Limitation on Itemized Deductions. For taxable years beginning in 2007, the "applicable amount" of adjusted gross income under § 68(b), above which the amount of otherwise allowable itemized deductions is reduced under § 68, is $156,400 (or $78,200 for a separate return filed by a married individual).
.13 Qualified Transportation Fringe. For taxable years beginning in 2007, the monthly limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, is $110. The monthly limitation under § 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $215.
.14 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2007, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $98,400 for joint returns and $65,600 for other returns. The exclusion is
- 13 -
completely phased out for modified adjusted gross income of $128,400 or more for joint returns and $80,600 or more for other returns.
.15 Adoption Assistance Programs. For taxable years beginning in 2007, under§ 137(a)(2) the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $11,390. For taxable years beginning in 2007, under § 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $11,390. The amount excludable from an employee's gross income
begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $170,820 and is completely phased out for taxpayers with modified adjusted gross income of $210,820 or more. (See section 3.03 of this revenue procedure for the adjusted items relating to the adoption credit.)
.16 Private Activity Bonds Volume Cap. For calendar year 2007, the amounts used under § 146(d)(1) to calculate the State ceiling for the volume cap for private activity bonds are the greater of (1) $85 multiplied by the State population, or (2) $256,235,000.
.17 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow. For calendar year 2007, under § 1.148-5(e)(2)(iii)(B)(1), a broker's commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $33,000, and
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(B) 0.2 percent of the computational base (as defined in § 1.148-5(e)(2)(iii)(B)(2)) or, if more, $3,000; and (2) the issuer does not treat more than $93,000 in brokers' commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.
.18 Personal Exemption.
(1) Exemption amount. For taxable years beginning in 2007, the personal
exemption amount under § 151(d) is $3,400. The exemption amount for taxpayers with adjusted gross income in excess of the maximum phaseout amount is $1,133 for taxable years beginning in 2007.
(2) Phaseout. For taxable years beginning in 2007, the personal exemption amount begins to phase out at, and reaches the maximum phaseout amount after, the following adjusted gross income amounts:
AGI - Beginning AGI - Maximum
Filing Status of Phaseout Phaseout
Married Individuals Filing Joint Returns and $234,600 $357,100
Surviving Spouses (§ 1(a))
Heads of Households (§ 1(b)) $195,500 $318,000
Unmarried Individuals (other than Surviving $156,400 $278,900
Spouses and Heads of Households) (§ 1(c))
Married Individuals Filing Separate $117,300 $178,550
Returns (§ 1(d))
.19 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2007, under § 179(b)(1) the aggregate cost of any § 179 property a taxpayer may elect
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to treat as an expense can not exceed $112,000. Under § 179(b)(2) the $112,000 limitation is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2007 taxable year exceeds $450,000.
.20 Eligible Long-Term Care Premiums. For taxable years beginning in 2007, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term "medical care," are as follows:
Attained Age Before the Close of the Taxable Year Limitation on Premiums
40 or less $ 290
More than 40 but not more than 50 $ 550
More than 50 but not more than 60 $1,110
More than 60 but not more than 70 $2,950
More than 70 $3,680
.21 Retirement Savings.
(1) For taxable years beginning in 2007, the applicable dollar amount under
§ 219(g)(3)(B)(i) for taxpayers filing a joint return is $83,000. If the taxpayer's spouse is not an active participant, the applicable dollar amount for the spouse under § 219(g)(3)(B)(i) is $156,000 for taxable years beginning in 2007.
(2) For taxable years beginning in 2007, the applicable dollar amount under
§ 219(g)(3)(B)(ii) for all other taxpayers (except for married taxpayers filing separately)
is $52,000.
(3) The applicable dollar amount under § 219(g)(3)(B)(iii) for married taxpayers filing separately is $0.
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.22 Medical Savings Accounts.
(1) Self-only coverage. For taxable years beginning in 2007, the term "high
deductible health plan" as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $1,900 and not more than $2,850, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $3,750.
(2) Family coverage. For taxable years beginning in 2007, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $3,750 and not more than $5,650, and under which the annual outof-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $6,900.
.23 Interest on Education Loans. For taxable years beginning in 2007, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $55,000 ($110,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $70,000 or more ($140,000 or more for joint returns).
.24 Health Savings Accounts.
(1) Monthly contribution limitation. For calendar year 2007, the monthly limitation for any month on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible plan as of the first day of the month is 1/12 of the lesser of (1) the annual deductible, or (2) $2,850. For calendar year 2007, the monthly limitation for
- 17 -
any month on deductions under § 223(b)(2)(B) for an individual with family coverage under a high deductible plan as of the first day of the month is 1/12 of the lesser of (1) the annual deductible, or (2) $5,650.
(2) High deductible health plan. For calendar year 2007, a "high deductible health plan" is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,100 for self-only coverage or $2,200 for family coverage, and the annual out-of pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $5,500 for self-only coverage or $11,000 for family coverage.
.25 Roth IRAs.
(1) For taxable years beginning in 2007, the applicable dollar amount under
§ 408A(c)(3)(C)(ii)(I) for taxpayers filing a joint return is $156,000.
(2) For taxable years beginning in 2007, the applicable dollar amount under
§ 408A(c)(3)(C)(ii)(II) for all other taxpayers (except for married taxpayers filing separately) is $99,000.
(3) The applicable dollar amount under § 408A(c)(3)(C)(ii)(III) for married taxpayers filing separately is $0.
.26 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2007, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $136.
.27 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns.
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(1) Low cost article. For taxable years beginning in 2007, the unrelated business income of certain exempt organizations under § 513(h)(2) does not include a "low cost article" of $8.90 or less.
(2) Other insubstantial benefits. For taxable years beginning in 2007, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified by Rev. Proc. 92-49, 1992-1 C.B. 987, and modified by Rev. Proc. 92-102, 1992-2 C.B. 579), for disregarding the value of insubstantial benefits received by a donor in return for a fully deductible charitable contribution under § 170, are $8.90, $44.50, and $89, respectively.
.28 Funeral Trusts. For a contract entered into during calendar year 2007 for a
"qualified funeral trust," as defined in § 685, the trust may not accept aggregate contributions by or for the benefit of an individual in excess of $8,800.
.29 Expatriation to Avoid Tax. For calendar year 2007, an individual with "average annual net income tax" of more than $136,000 for the five taxable years ending before the date of the loss of United States citizenship under § 877(a)(2)(A) is subject to tax under § 877(b).
.30 Foreign Earned Income Exclusion. For taxable years beginning in 2007, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $85,700.
.31 Valuation of Qualified Real Property in Decedent's Gross Estate. For an estate of a decedent dying in calendar year 2007, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes
- 19 -
of the estate tax can not exceed $940,000.
.32 Annual Exclusion for Gifts.
(1) For calendar year 2007, the first $12,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.
(2) For calendar year 2007, the first $125,000 of gifts to a spouse who is not a
citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.
.33 Tax on Arrow Shafts. For calendar year 2007, the tax imposed under
§ 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.42 per shaft.
.34 Passenger Air Transportation Excise Tax. For calendar year 2007, the tax under § 4261(b) on the amount paid for each domestic segment of taxable air transportation is $3.40. For calendar year 2007, the tax under § 4261(c) on any amount paid (whether within or without the United States) for any air transportation, if the transportation begins or ends in the United States, generally is $15.10. However, for a domestic segment beginning or ending in Alaska or Hawaii as described in § 4261(c)(3), the tax applies only to departures and the rate is $7.50.
.35 Reporting Exception for Certain Exempt Organizations with Nondeductible
Lobbying Expenditures. For taxable years beginning in 2007, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3)
- 20 -
(and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $95 or less.
.36 Notice of Large Gifts Received from Foreign Persons. For taxable years
beginning in 2007, recipients of gifts from certain foreign persons may be required to report these gifts under § 6039F if the aggregate value of gifts received in a taxable year exceeds $13,258.
.37 Persons Against Whom a Federal Tax Lien Is Not Valid. For calendar year 2007, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $1,290, or (2) a mechanic's lienor under § 6323(b)(7) that repaired or improved certain residential property if the contract price with the owner is not more than $6,450.
.38 Property Exempt from Levy. For calendar year 2007, the value of property
exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) can not exceed $7,720. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) can not exceed $3,860.
.39 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2007, the dollar amount used to determine the "2-percent portion" (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,250,000.
.40 Attorney Fee Awards. For fees incurred in calendar year 2007, the attorney fee
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award limitation under § 7430(c)(1)(B)(iii) is $170 per hour.
.41 Periodic Payments Received under Qualified Long-Term Care Insurance
Contracts or under Certain Life Insurance Contracts. For calendar year 2007, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $260.
SECTION 4. EFFECT ON OTHER DOCUMENTS
Rev. Proc. 2002-41 is modified for taxable years beginning after December 31, 2006.
SECTION 5. EFFECTIVE DATE
.01 General Rule. Except as provided in section 5.02, this revenue procedure applies to taxable years beginning in 2007.
.02 Calendar Year Rule. This revenue procedure applies to transactions or events occurring in calendar year 2007 for purposes of sections 3.08 (low-income housing credit), 3.10 (pipeline construction industry optional expense substantiation rules), 3.16 (private activity bond volume cap), 3.17 (safe harbor rules for broker commissions on guaranteed investment contracts or investments purchased for a yield restricted defeasance escrow), 3.24 (health savings accounts), 3.28 (funeral trusts), 3.29 (expatriation to avoid tax), 3.31 (valuation of qualified real property in decedent's gross
estate), 3.32 (annual exclusion for gifts), 3.33 (tax on arrow shafts), 3.34 (passenger air transportation excise tax), 3.37 (persons against whom a federal tax lien is not valid), 3.38 (property exempt from levy), 3.39 (interest on a certain portion of the estate tax
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payable in installments), 3.40 (attorney fee awards), and 3.41 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts).
Millions of people overpay:
How much taxpayers overpay is subject to regular studies. The study of 1998 data was instigated by former House Majority Leader Dick Armey, R-Texas. In its study, the GAO initially found half a million taxpayers neglected to deduct mortgage interest.
In 2003, a second GAO exam of 1998 returns expanded to unclaimed deductions for loan points, charitable contributions and other taxes, such as real estate, personal property and state and local income.
The final tally: as many as 2.2 million filers erroneously paid Uncle Sam too much, by an average of $438 per taxpayer. (The GAO has not updated the report since.)
Who ignored deductions and paid unnecessary taxes? The GAO says it was mainly lower-income and middle-income taxpayers. Taxpayers in the $25,000-to-$50,000 income range accounted for the bulk of those who paid too much; filers earning between $50,000 and $75,000 were a close second.
Taxpayer confusion and a nightmarish tax code:
At the time, GAO director of tax issues James White said that his agency did not try to determine why filers claimed the standard deduction when itemizing could have saved them money. But critics say the problem is the increasingly complex tax code.
Confusion apparently isn't limited to rank-and-file taxpayers. The study estimated that professionals prepared almost half the 1998 returns on which taxes were overpaid because deductions weren't claimed.
Amended returns could pay off:
Taxpayers who cheated themselves by taking the standard deduction, however, don't have to wait for legislation. They can use existing tax laws to recoup lost tax money.
If you discover you could have saved by itemizing deductions and are willing to tackle your taxes again, file an amended return on Form 1040X. It will let you negate your original standard deduction and list all the money-saving deductions you should have taken.
Generally, tax returns must be amended within three years of the original filing deadline. If you wanted to amend your 2002 return, sorry. The deadline was April 17, 2006. If you want to amend your 2003 return (which was due April 15, 2004), you have until April 16, 2007. (Because April 15 in 2007 falls a Sunday.)
But if you also paid too much by not itemizing deductions on your 2003 or 2004 returns, get several copies of 1040X and get to work. To get your rightful dollar back money, you must file an amended return for each affected tax year.
and I do admire his talents. :wink:
