Profit From New Laws

Changes in legislation for 2007 just might put more money in your pocket. The government has made decisions regarding taxation and retirement account contributions that you may find valuable in the coming year.

Higher Limits on Roth IRA Income

Single tax filers with incomes below $114,000 now qualify for a Roth, as do married couples with incomes below $166,000. The income limits previously were $110,000 and $160,000. Also new this year, you may choose to have your tax refund directly deposited into your IRA account. Heretofore your only choices were to deposit your refund check to a bank checking or savings account. You can complete IRS Form 8888 to have your refund directly deposited into a maximum of three different IRA or bank accounts.

Increased 401(k) Contribution Limits

The maximum contribution that you can make annually to your 401(k) was increased from $15,000 to $15,500. The maximum for individuals over the age of 50 was raised from $20,000 to $20,500. If you contribute the maximum allowed automatically, be sure to adjust your 2007 contribution to take advantage of the extra $500 you can save this year.

Tuition Break Extended

Individuals with incomes below $65,000 and married couples with incomes below $130,000 can deduct up to $4,000 in tuition and education expenses for dependents or themselves. This break had expired after the 2005 tax year, but Congress voted to extend the break for the 2006 and 2007 tax years.

Sales Tax Break Continued

Congress passed legislation to extend the sales tax deduction for 2007. If you itemize your tax return, you can choose to deduct your state income tax on your federal return or your state sales tax. This is a major bonus for folks in states with no income tax.

PMI May Be Deductible
A new law permits homeowners who need to carry private mortgage insurance (PMI) to deduct their premium costs if their income is below $100,000. This break is only good for new mortgages in 2007; paying PMI on an old mortgage won’t qualify you for the deduction. Be aware that this new deduction is only good for 2007.