More Than Accounting

September Tax Review

Posted by Rhonda Spaulding on September 26, 2007

Do you only think about your taxes during March or April? Maybe it is not a hot topic of conversation this time of year or anytime for that matter, but taxes are a reality year round. Here are a few deductions you can think about taking for 2007 as well as some changes that might affect you when tax time does roll around.

Some energy credits are set to expire at the end of 2007. You can take up to a $500 tax credit for qualified exterior windows and doors, insulation, storm doors and windows, and metal roofing. If you need to do some home improvements, do so before the end of 2007. Generally, you can deduct 10% of the cost up to $500. There are also certain HVAC equipment credits as well as deductions for fuel efficient automobiles.

If you are planning to buy a hybrid car, there is no tax credit for the Toyota and Lexus hybrids allowed for vehicles purchased after September 30, 2007
. The Toyota and Lexus vehicles purchased before the September 30 deadline will qualify for a small credit between $387 and $787 depending on the make and model purchased. The Ford hybird vehicles still qualify for the full credit. Is buying a hybrid really going to save you money? Click here for a calculator that will allow you to compare the cost of a standard car to a hybrid to figure out the savings or cost of driving a hybrid. See the chart at for more detailed explanations of the actual credits available.

Check your withholdings. Did you get a large refund last year or have to pay a large amount with your tax return? Now is a great time to adjust your withholdings from your paycheck to keep from having those large refunds and taxes due. Did you realize that correcting your withholdings to keep from having a $2000 refund could increase your bi-weekly paychecks by as much as $250 for the rest of this year? You can figure how to adjust your withholdings by using this calculator provided by the IRS.

Private mortgage insurance (PMI) deduction.
On the surface, it sounds good. For 2007, you can deduct premiums paid for PMI on your mortgage. However, the deduction only applies to home loans closed or refinanced in 2007. There are also income limits. You will not receive the full benefit if you adjusted gross income exceeds $100,000. While I would not suggest getting a mortgage where you did not have 20% down, this might be a good way to rid yourself of that second mortgage by refinancing and deducting the premiums this year. However, Congress will have to act to extend the law as it currently only applies to 2007.

The laws regarding Health Savings Accounts have been loosened a bit.

  • In the past, the maximum annual contribution to an HSA could not exceed the lesser of (1) 100% of the annual deductible under the high deductible health plan, or (2) a fixed dollar amount (for 2007, $2,850 in the case of self-only coverage and $5,650 in the case of family coverage). The new law repeals the 100%-of-deductible limit starting in 2007.
  • The new law also allows a full year deduction for contributions if coverage is obtained by the last month of the year and will be in place for 12 months.
  • The law also now allows a one-time rollover from an IRA to an HSA if it cannot be funded by direct contributions. Distributions for medical expenses from an IRA are taxable, from an HSA they are not.

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