It is not too late for making an IRA contribution for 2007
The Individual Retirement Arrangement is a great vehicle for saving on taxes for
qualified taxpayers. If you contributed less than the maximum allowed funds to your
IRA for tax year 2007, you may still be eligible to do so. You can contribute to
either a traditional or Roth IRA until your April due date for filing your tax return
for 2007. Extensions are not included. Please contact us for further details. If
you do plan to make a contribution, please make sure that you tell your account
trustee that the contribution is for 2007. Contribution limits vary depending on
whether you are more than 50 years old. Those older than 50 can make contributions
of $5,000. Otherwise, the limit is $4,000. These limits apply to traditional IRAs
as well as Roth IRAs. A variety of other factors could impact your contribution
limits, including your income, whether you or your spouse are filing jointly or
separately, and whether you are covered by an employer's pension plan. Please have
a word with us for additional details. If you report a contribution to a traditional
IRA on your return, but fail to make an actual contribution, you must file an amended
return.
For more information on how to make a contribution and the differences between a
traditional IRA and a Roth IRA, please contact us.
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Sale of your home
If you have a gain from the sale or exchange of your primary home, you may be able
to exclude all or part of the gain from your income. Individuals may be able to
exclude up to $250,000 of capital gain, and married taxpayers filing joint returns
may be able to exclude up to $500,000 of gain each time you sell your main home,
but generally no more frequently than once every two years. To qualify for this
exclusion of gain, you must meet ownership and use tests.
- Ownership Test: During the 5-year period ending on the date of the sale, you must
have owned the home for at least 2 years.
- Use Test: During the 5-year period ending on the date of the sale, you must have
lived in the home as your main home at least 2 years.
If you and your spouse file a joint return for the year of the sale, you can exclude
the gain if either of you qualify for the exclusion. But both of you would have
to meet the use test to claim the $500,000 maximum amount. If you do not meet the
ownership and use tests, you may be allowed to exclude a reduced maximum amount
of the gain realized on the sale of your home if you sold your home because of health
reasons, a change in place of employment, or certain unforeseen circumstances. Unforeseen
circumstances include, for example, divorce or legal separation, natural or man-made
disasters resulting in a casualty to your home, or an involuntary conversion of
your home.
Please contact us to determine how the sale of your home will impact your taxes
this year.
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Education costs
Education tax credits can help offset the costs of higher education for yourself
or a dependent. The Lifetime Learning Credit and the Hope Credit are two education
credits available which may benefit you. Because they are credits, rather than deductions,
you may be able to subtract them in full dollar for dollar from your federal income
tax.
The Lifetime Learning Credit
- This applies to undergraduate, graduate and professional degree courses, including
instruction to acquire or improve job skills, regardless of the number of years
in the program.
- If you qualify, your credit equals 20% of the first $10,000 of post-secondary tuition
and fees you pay during the year, for a maximum credit of $2,000 per tax return.
The Hope Credit
- Applies for the first two years of post-secondary education, such as college or
vocational school. It does not apply to the third, fourth, or higher years of undergraduate
programs, to graduate programs, or to professional-level programs.
- It can be worth up to $1,650 per eligible student, per year.
- You're allowed a credit of 100% of the first $1,100 of qualified tuition and related
fees paid during the tax year, plus 50% of the next $1,100.
- Each student must be enrolled at least half-time for at least one academic period
which began during the year.
- The student must be free of any federal or state felony conviction for possessing
or distributing a controlled substance as of the end of the tax year.
Please contact us to determine your eligibility for your education credits.
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