2007 Tax Law Changes

How tax requirements have changed for '07

Changes will affect just about all taxpayers.

Every year, Congress or the Internal Revenue Service makes life better or worse for taxpayers by changing the tax laws or the tax rules that implement the tax laws. 2007 was no exception. There were a number of changes, mostly required to adjust the tax code for inflation. Changes for 2007 range from annual adjustments to account for inflation to an important new rule on record-keeping for charitable deductions. A late and important break: a fix on the alternative minimum tax. Here are the changes that affect most taxpayers.
New tax brackets for all taxpayers

The brackets for both 2007 and 2008 have been adjusted for inflation, and that's probably good news for you.

Standard deduction goes up

The standard deduction is higher and broader this year. The deduction amounts will grow again in 2008.

Personal exemption moves higher

These changes for 2007 and 2008 affect all members of your family.

Business-mileage rate moves higher

This will help taxpayers who use their vehicles on their jobs. There are mileage allowances for those who seek jobs or medical attention or who use vehicles in charitable activities.

New charitable-deduction rules

Record-keeping requirements have been expanded starting in 2007.

Limit on itemized deductions increases

Your deductions are capped once your income exceeds specified levels.

IRA deduction limits go up

These changes for 2007 and 2008 will help taxpayers trying to build up their retirement stakes.

Hope and Lifetime Learning income limits raised

The increases for 2007 and 2008 will make these important education credits accessible to more taxpayers.

Adoption credit rises

This credit will benefit most taxpayers who add children to their families through adoption.

Deductible mortgage insurance premiums

These premiums can be deducted in 2007 and possibly beyond.

Musical composers get a break

New capital-gains rules apply to musical works.

Medical-savings limits increased

Taxpayers who fund their own health plans now have higher annual deductibles and out-of-pocket limits.

Alternative-minimum-tax exemption rises for 2007

This helps taxpayers who might have too many deductions. But unless Congress acts, the exemptions could fall in 2008, raising taxes for thousands of taxpayers.