2007 Tax Filing Season

At Gilman Ciocia, you’ll have a personal tax team at your side working for you throughout the year. Taxes can be a complicated business and we strive to educate all of our customers on the laws, credits and deductions each and every year.

Available Credits

Energy tax credits and Incentives
There are a number of existing tax credits and incentives designed to encourage energy efficiency and conservation, promote alternative and renewable energy sources, reduce US dependence on foreign sources of energy, increase domestic production, modernize the electricity grid, and encourage the expansion of nuclear energy. New credits include:

What Does that Mean for You?

Tax Credit for Hybrid Vehicles
In 2007, a credit is available for hybrid vehicles. The credit has two components—one based on the vehicle’s fuel economy and the other based on the estimated lifetime fuel savings. But you have to act fast. This credit will be phased out once the combined total of qualifying vehicles exceeds 60,000—regardless of model—sold after 2005 by the manufacturer for use in the US.

Tax Credit for residential energy improvements
Energy improvements placed in service in 2006 and 2007 to a principal residence in the US qualify for a limited tax credit. In general, the credit is the cost of qualifying heat pumps, boilers, water heaters and fans, plus 10% of the cost of qualifying insulation, exterior windows including skylights, exterior doors, and metal roofs coated with heat-reduction pigments. However, the total credit for both 2006 and 2007 is limited to $500, of which no more than $200 can be for window components, $50 for an advanced main air circulating fan, $150 for a qualified furnace or hot water boiler, or $300 for any qualified central air conditioner, heat pump, or water heater.

Tax Credit for residential solar and fuel cell equipment
For property placed in service in 2006 and 2007, a credit is allowed for 30% of the cost of qualifying solar water heaters, up to $2000 per year, and a credit subject to the same 30%/$2000 limit also applies for photovoltaic (electricity-generating) solar panels. In addition, a 30% credit is allowed for fuel cell property, up to $500 for each half-kilowatt of capacity installed per year.
Labor costs for onsite installation and for piping and wiring connections are qualifying costs for all three credits. However, the credits do not apply to equipment used to heat swimming pools or hot tubs.

Optional Roth 401K or 403B
If your plan permits, in 2007 you may treat elective deferrals as after-tax Roth contributions to be held in separate accounts. As under Roth IRA rules, tax-free Roth distributions would be allowed after a five-year waiting period if you are at least age 59 1/2.

IRA and Roth IRA Contributions
The annual contribution limit will stay at $4000 for 2007. For individuals 50 and over, an additional contribution (catch-up provision) of $1,000 will be allowed for 2007.

Elective Deferrals
The deferral limit for 401(k), 403(b), SEP and 457 plans is $15,500 in 2007, plus a catch up provision for age 50 and over at $5000—bringing the contribution amount for age 50 and over to $20,500.

Estate Tax Exclusion and Top Rate
For individuals dying in 2007, the exclusion amount remains at $2,000,000 and the top estate tax rate remains at 46%.

Mortgage Insurance Premiums
For 2007, Mortgage Insurance Premiums that you pay for "qualified mortgage insurance" in connection with home acquisition debt on your qualified home are deductible as home mortgage interest.

The Mortgage Forgiveness Relief Act
The Mortgage Forgiveness Relief Act of 2007 was instituted in December 2007, providing relief to taxpayers who are facing hardship due to home foreclosures by allowing a limited exclusion for discharged home mortgage debt.

The Alternative Minimum Tax (AMT)
A one-year patch for the alternative minimum tax (AMT) was signed into law, also in December 2007. This means about 20 million households are protected from a tax increase this year caused by the alternative minimum tax.

Charitable Contributions
All cash donations made to charity must now be substantiated by a cancelled check, a bank record, or a detailed receipt of the charity. Otherwise, the contribution will not be deductible. Be sure to bring all your receipts or bank records to your tax preparer to receive your charitable deduction(s).

Taxpayers who are 70 1/2 years old or older can now exclude from 2007 income, up to $100,000 of otherwise taxable IRA distributions if the funds were transferred in 2007 directly from an IRA to charity.

If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.

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