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Ernst And Young Publishes '07 Tax Tips For US Taxpayers

by Mike Godfrey, Tax-News.com, Washington

27 December 2006


As the end of the year approaches, now is the time to plan and take advantage of US tax law changes for the 2006-filing year, according to the Ernst and Young 2007 Tax Guide.

With 2007 around the corner, the authors of the Ernst & Young 2007 Tax Guide offer the following tips for taxpayers on new credits and deductions:

Alternative Motor Vehicle Credit

Various credit amounts are available for individuals who lease or buy an energy-efficient vehicle. The credit covers qualified fuel cell, advanced lean burn technology motor vehicles, qualified hybrid motor vehicles, and qualified alternative fuel motor vehicles. The credit is available for the first 60,000 vehicles purchased of each qualified model.

Two New Personal Tax Credits for the Purchase of Residential Energy- Efficient Property

A non-business energy property credit of up to $500 is available for insulation, exterior windows and doors, furnaces, hot water heaters, and other property that qualifies as energy-efficient improvements. Other limits apply depending on the type of improvement installed. The residential energy efficient credit is applied to 30% of the amount paid (with certain limits) for photovoltaic heating systems, qualified solar water heating, and qualified fuel cell systems.

Reduced Rates on Capital Gains and Qualified Dividends

Under current law, long-term capital gains and qualified dividends are taxed at a maximum rate of 15%. The reduced rates were extended through 2010.

Increased Individual Alternative Minimum Tax (AMT) Exemption Amount

Legislation passed this year increased the AMT exemption to $42,500 ($62,550 for married couples filing jointly) for 2006.

Income Limits on Roth IRA

The adjusted gross income limit on conversions of traditional IRAs to Roth IRAs have been eliminated after 2009 but planning now can help prepare you to take advantage of this change.

Increased Age of Minor Children Subject for "Kiddie Tax"

In 2006, the age for the minor child tax provision increased from under 14 to under 18 years of age. Under the Kiddie Tax, a child's unearned income (over $1,700) is taxed at the parent's rate.

Partial Payments

Taxpayers who can't pay their full tax liability to the IRS can offer to settle for a lower amount. The new law requires taxpayers to make partial payments while the IRS considers their offer in-compromise.

Reporting of Interest on Tax-Exempt Bonds

Interest paid on tax-exempt bonds is now subject to information reporting similar to interest paid on taxable obligations.

Charitable Donations

Contributions of clothing or household items made after August 17, 2006, are generally not deductible unless the item is in good used condition or better. In 2007, monetary donations will not be deductible unless you have a bank record, credit card statement or receipt that shows the name of the charity and the date and amount of the contribution.

Standard Mileage

The standard mileage deduction for driving on business matters increases to 48 1/2 cents per mile in 2007; up from 44 1/2 cents in 2006.


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