President Bush on December 20 signed a bill (H.R. 3648) to exclude from gross income up to $2 million in "acquisition" debt forgiven on a mortgage directly related to a decline in the value of the the residence or to the financial condition of the taxpayer. Therefore, it appears that additional amounts borrowed based on the residence equity would not qualify.
Under H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, the tax exemption for mortgages is limited to a taxpayer's primary residence and to debt forgiven during tax years 2007, 2008, and 2009.
The measure also extends for three years, through 2010, the treatment of private mortgage insurance as deductible qualified residence interest for some taxpayers, and it treats as nontaxable income 50 percent of state and local tax rebates or reductions given to volunteer emergency responders.
Additionally, the Bill adds, effective January 1, 2008, in the case of a sale of his/her primary residence by an unmarried individual whose spouse is deceased on the date of such sale, the surviving spouse gets to exclude $500,000 in capital gain if such sale occurs not later than 2 years after the date of death of such spouse.
Click here for a copy of the bill.
Friday, December 21, 2007
Wednesday, December 19, 2007
AMT patch goes to President
H.R. 3996 the "Tax Increase Prevention Act of 2007," which extends the AMT patch, has passed the Senate and House, and is expected to be signed by the President.
The bill provides a one-year extension to the alternative minimum tax (AMT) exemption. The AMT exemption amounts, which are increased for inflation, are $66,250 for joint filers and $44,350 for individuals. The bill also extends the use of personal nonrefundable credits for AMT and regular tax purposes through December 31, 2007. These two changes will save an estimated 23 million taxpayers from paying AMT for the 2007 tax year.
Click here for a copy of the bill.
When AMT was enacted by Congress, the exemption for married couples was $30,000 and not indexed for inflation, that amount would be about $165,000 today if it had been indexed for inflation.
The bill provides a one-year extension to the alternative minimum tax (AMT) exemption. The AMT exemption amounts, which are increased for inflation, are $66,250 for joint filers and $44,350 for individuals. The bill also extends the use of personal nonrefundable credits for AMT and regular tax purposes through December 31, 2007. These two changes will save an estimated 23 million taxpayers from paying AMT for the 2007 tax year.
Click here for a copy of the bill.
When AMT was enacted by Congress, the exemption for married couples was $30,000 and not indexed for inflation, that amount would be about $165,000 today if it had been indexed for inflation.
Wednesday, December 12, 2007
Web Sites to check for Product Recalls
A recent article from Market Watch cites three web sites for checking product recalls:
Government web site:
http://www.recalls.gov/recent.html,
Consumer Product Safety Commission Recall Announcements and Product Safetey Alerts page:
http://www.cpsc.gov/cpscpub/prerel/prerel.html, and
Consumer Reports (subscriptions required):
http://www.consumerreports.org/cro/consumer-protection/recalls/index.htm?AFFID=S01AR0.
Government web site:
http://www.recalls.gov/recent.html,
Consumer Product Safety Commission Recall Announcements and Product Safetey Alerts page:
http://www.cpsc.gov/cpscpub/prerel/prerel.html, and
Consumer Reports (subscriptions required):
http://www.consumerreports.org/cro/consumer-protection/recalls/index.htm?AFFID=S01AR0.
Monday, December 3, 2007
Interest Rates Drop for the First Quarter of 2008
http://www.irs.gov/newsroom/article/0,,id=176038,00.html.
R-2007-193, Nov. 28, 2007
WASHINGON – The Internal Revenue Service today announced that interest rates for the calendar quarter beginning January 1, 2008, will drop by one percentage point. The new rates will be:
* seven (7) percent for overpayments [six (6) percent in the case of a corporation];
* seven (7) percent for underpayments;
* nine (9) percent for large corporate underpayments; and
* four and one-half (4.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during October 2007.
Related Item: Revenue Ruling 2007-68.
R-2007-193, Nov. 28, 2007
WASHINGON – The Internal Revenue Service today announced that interest rates for the calendar quarter beginning January 1, 2008, will drop by one percentage point. The new rates will be:
* seven (7) percent for overpayments [six (6) percent in the case of a corporation];
* seven (7) percent for underpayments;
* nine (9) percent for large corporate underpayments; and
* four and one-half (4.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during October 2007.
Related Item: Revenue Ruling 2007-68.
Friday, November 30, 2007
New Refundable Credit for Unused AMT Credit
Under the Tax Relief and Health Care Act of 2006, enacted on December 20, 2006, new rules were added to permit a refundable credit for certain old unused alternative minimum tax credits. As a result, an individual's minimum tax credit that is allowable for any tax year beginning before 2013 cannot be less than the "AMT refundable credit amount," which is the greater of:
(i) The lesser of $5,000 or the long-term unused minimum tax credit; or
(ii) 20 percent of the long-term unused minimum tax credit.
The long-term unused minimum tax credit for any tax year is the portion of the minimum tax credit attributable to the adjusted net minimum tax (ANMT) for tax years before the third tax year immediately preceding the current tax year. For this determination, credits are treated as allowed on a first-in, first-out basis.
The minimum tax credit for any tax year is the excess (if any) of the ANMT for all prior tax years beginning after 1986 over the minimum tax credit allowable for those years.
The ANMT generally is the net minimum tax reduced by the amount that would have been the net minimum tax if only exclusion-type preferences and adjustments were considered.
The new refundable credit is reduced by the percentage reduction in the personal exemption deduction if an individual's adjusted gross income (AGI) for any tax year exceeds the threshold for phasing-out that deduction.
Example (1):
John has unused AMT credit carryover from 2003 to 2007 of $3,000, and doesn’t have enough AMT income (AMTI) for a phaseout. John would be refunded $3,000 under (i) above.
Example (2):
Jane has unused AMT credit carryover from 2003 to 2007 of $100,000, and doesn’t have enough AMTI for a phaseout. Jane would be refunded $20,000 under (ii) above.
If the minimum tax credit determined under the "old law" for a taxable year is greater than the refundable credit, no additional refundable credit is allowed. The refundable credit is phased out for higher-income taxpayers based on the same ratio as applies to phase out personal exemptions. The phase out is two percentage points for each $2,500, or $1,250 for married persons filing a separate return, (or fraction thereof) by which the taxpayer’s adjusted gross income exceeds certain threshold amounts, to a maximum of 100%. For 2007, the threshold amounts are $234,600 for joint filers or a surviving spouse, $195,550 for a head of household, $156,400 for single taxpayers, and $117,300 for married persons, filing separately.
Example (3):
Jane, a single person who is not a head of household, would otherwise qualify for a refundable credit of $20,000 for 2007. Her adjusted gross income is $200,000. Her phaseout is $200,000 - $156,400 = $43,600 / $2,500 = 18% (rounded) X 2% =36%. Her allowable credit is 100% - 36% = 64% X $20,000 (tentative refundable credit) = $12,800.
Example (4):
In 2007, John's AGI causes a 50 percent reduction in his personal exemption deduction. John's regular tax is $45,000 and his tentative minimum tax is $40,000. His minimum tax credit for 2007, before the limitation, is $1.1 million, of which $1 million is a long-term unused minimum tax credit.
The 2007 AMT refundable credit is $100,000 (20 percent of the $1 million long-term unused minimum tax credit less the 50 percent reduction mentioned at the beginning of this example). The 2007 minimum tax credit allowable also is $100,000 (the greater of the AMT refundable credit or the credit otherwise allowable).
The $5,000 credit allowable without regard to this new law is not refundable. However, the additional $95,000 credit allowable under the new law is refundable. Thus, John has a $55,000 overpayment. The remaining $1 million minimum tax credit is carried forward.
For a draft copy of the tax form used to claim the tax credit, click here.
(i) The lesser of $5,000 or the long-term unused minimum tax credit; or
(ii) 20 percent of the long-term unused minimum tax credit.
The long-term unused minimum tax credit for any tax year is the portion of the minimum tax credit attributable to the adjusted net minimum tax (ANMT) for tax years before the third tax year immediately preceding the current tax year. For this determination, credits are treated as allowed on a first-in, first-out basis.
The minimum tax credit for any tax year is the excess (if any) of the ANMT for all prior tax years beginning after 1986 over the minimum tax credit allowable for those years.
The ANMT generally is the net minimum tax reduced by the amount that would have been the net minimum tax if only exclusion-type preferences and adjustments were considered.
The new refundable credit is reduced by the percentage reduction in the personal exemption deduction if an individual's adjusted gross income (AGI) for any tax year exceeds the threshold for phasing-out that deduction.
Example (1):
John has unused AMT credit carryover from 2003 to 2007 of $3,000, and doesn’t have enough AMT income (AMTI) for a phaseout. John would be refunded $3,000 under (i) above.
Example (2):
Jane has unused AMT credit carryover from 2003 to 2007 of $100,000, and doesn’t have enough AMTI for a phaseout. Jane would be refunded $20,000 under (ii) above.
If the minimum tax credit determined under the "old law" for a taxable year is greater than the refundable credit, no additional refundable credit is allowed. The refundable credit is phased out for higher-income taxpayers based on the same ratio as applies to phase out personal exemptions. The phase out is two percentage points for each $2,500, or $1,250 for married persons filing a separate return, (or fraction thereof) by which the taxpayer’s adjusted gross income exceeds certain threshold amounts, to a maximum of 100%. For 2007, the threshold amounts are $234,600 for joint filers or a surviving spouse, $195,550 for a head of household, $156,400 for single taxpayers, and $117,300 for married persons, filing separately.
Example (3):
Jane, a single person who is not a head of household, would otherwise qualify for a refundable credit of $20,000 for 2007. Her adjusted gross income is $200,000. Her phaseout is $200,000 - $156,400 = $43,600 / $2,500 = 18% (rounded) X 2% =36%. Her allowable credit is 100% - 36% = 64% X $20,000 (tentative refundable credit) = $12,800.
Example (4):
In 2007, John's AGI causes a 50 percent reduction in his personal exemption deduction. John's regular tax is $45,000 and his tentative minimum tax is $40,000. His minimum tax credit for 2007, before the limitation, is $1.1 million, of which $1 million is a long-term unused minimum tax credit.
The 2007 AMT refundable credit is $100,000 (20 percent of the $1 million long-term unused minimum tax credit less the 50 percent reduction mentioned at the beginning of this example). The 2007 minimum tax credit allowable also is $100,000 (the greater of the AMT refundable credit or the credit otherwise allowable).
The $5,000 credit allowable without regard to this new law is not refundable. However, the additional $95,000 credit allowable under the new law is refundable. Thus, John has a $55,000 overpayment. The remaining $1 million minimum tax credit is carried forward.
For a draft copy of the tax form used to claim the tax credit, click here.
Thursday, November 29, 2007
Honda Hybrid Begins Phase-Out on January 1, 2008
Here is an IRS announcement on Honda hybrid credit will be reduced next year.
http://www.irs.gov/newsroom/article/0,,id=175828,00.html.
A related notice is here.
http://www.irs.gov/newsroom/article/0,,id=175828,00.html.
A related notice is here.
Tuesday, November 27, 2007
Mileage rate for 2008
The IRS has just announced mileage rates for 2008:
Business: 50.5 cents per mile, up from 48.5 cents in 2007
Medical and moving: 19 cents per mile, from 20 cents a mile in 2007
Charities: 14 cents per mile, no change from 2007 as rate is set by Congress
See http://www.irs.gov/newsroom/article/0,,id=176030,00.html for the official IRS notice.
Business: 50.5 cents per mile, up from 48.5 cents in 2007
Medical and moving: 19 cents per mile, from 20 cents a mile in 2007
Charities: 14 cents per mile, no change from 2007 as rate is set by Congress
See http://www.irs.gov/newsroom/article/0,,id=176030,00.html for the official IRS notice.
Sunday, November 11, 2007
Congress may fail to act on AMT limit
Two articles from the Sacramento Bee on Alternative Minimum Tax (AMT):
Congress may fail to act on AMT limit
http://www.sacbee.com/103/story/481922.html
Q & A: Alternative minimum tax
http://www.sacbee.com/103/story/481923.html
Congress may fail to act on AMT limit
http://www.sacbee.com/103/story/481922.html
Q & A: Alternative minimum tax
http://www.sacbee.com/103/story/481923.html
Friday, November 9, 2007
2008 SDI rates
The EDD has announced the 2008 SDI rate.
The rate is .008 (up from .006 in 2007)
The wage maximum is: $86,698 (up from 2007 maximum of $83,389)
The maximum SDI per employee is: $693.58 (up from 2007 maximum of $500.33)
Other 2008 EDD rates are available at EDD's website at
http://www.edd.ca.gov/taxrep/taxrte9x.htm#Withhold
The rate is .008 (up from .006 in 2007)
The wage maximum is: $86,698 (up from 2007 maximum of $83,389)
The maximum SDI per employee is: $693.58 (up from 2007 maximum of $500.33)
Other 2008 EDD rates are available at EDD's website at
http://www.edd.ca.gov/taxrep/taxrte9x.htm#Withhold
Thursday, November 8, 2007
Chairman Rangel's tax proposal
The House Ways and Means Committee passed HR 3970 and its companion bill, HR 3996, recently which Chairman Charlie Rangel labelled it as the "mother of all tax reforms". However, pundits have called this Bill D.O.A., not just opposed by the White House, but threat from the Senate as well. Nevertheless, it's always interesting to see what the politicians are thinking. Click here for a Congressional summary of HR 3970 and here for the text of the Bill. Click here for a summary of HR 3996.
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