Congress is stingy on useful home tax breaks

There's always a little pain involved in wading through the U.S. tax code.
Yet you can ease the dull ache of dealing with Internal Revenue Service forms and language when you find provisions that will lower your bill.
There are plenty of plums and pits in this year's ever-changing version of tax write-offs. Some deductions are designed to pump up the flagging U.S. economy, while others are meant to discourage taxpayers from being dishonest.
None of the new tax provisions will make much of a difference to those facing the heaviest financial burdens. Congress could have been more generous to homeowners facing the loss of their properties when their adjustable-rate loans or other housing costs became unaffordable.
Instead, lawmakers threw a moldy crust of bread in the form of rebates. These checks won't forestall a recession or relieve the ever-worsening credit crisis.
The way the new economic stimulus law is written, the rebates are "advance payments" that are credits against your 2008 tax. That means, in the interpretation of Commerce Clearing House, a Riverwoods, Ill.-based tax-information publisher, "a taxpayer filing a 2007 return in 2008 cannot claim the rebate as an offset to his or her 2007 tax liability." The government check can't be applied to estimated taxes for 2008, either. Although the rebates range from $300 for an individual to $2,400 for a married couple with four children, there are income limits on who can receive them.
Rebate phaseout
Like many other tax deductions, the rebate is unavailable if you exceed a certain income level.
For married couples, a $1,200 giveback isn't paid to joint filers who make more than $174,000 in adjusted income. Singles get cut off from a $600 credit at $87,000.
Another example of Congress coming up short on a new break that could have benefited more taxpayers is the write-off on mortgage insurance premiums.
Under a new rule, you can deduct mortgage insurance premiums paid in 2007. So far so good, until you get to the income cut-offs.
If your adjusted gross income is more than $100,000 — $50,000 if your filing status is married filing separately — the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated, the IRS says.
Debt write-off
Only if you are in dire circumstances with your home will Congress cut you some slack. You don't have to pay tax on as much as $2 million in forgiven mortgage debt.
Previously, the law cruelly made you pay tax on what you owed — as if it were income. In order to reap this break, though, you would probably lose your home through foreclosure or the sale price would be less than the mortgage value.
There's more tough love when it comes to charity.
The IRS now needs proof of any cash contribution to charities, regardless of the amount. That means a canceled check, bank or credit-card statement. A letter from the charity also works.
"That $5 you dropped into the Salvation Army bucket — you can't take a deduction without a receipt," says Barry Kaplan, a fee-only financial planner with Cambridge Southern Financial Advisors in Atlanta and a native of Lakewood. "You'll need a receipt or canceled check for all charitable gifts."
Some plums
If you give more, you need to document more. Donations valued at more than $5,000 must be backed up by a qualified appraisal unless they are publicly traded securities.
While the IRS cracks down in some areas in an effort to stem tax cheating, lawmakers are still interested in boosting the U.S. economy.
Buy any new property for your business? You can completely write off or "expense" as much as $250,000 of the value of what you bought this year. The old limit was $128,000.
You don't have to be a corporation to qualify for this break. Home businesses also can reap this Section 179 provision. Computers, furniture and other office items qualify. The property must be used "more than 50 percent for business and must be newly purchased property."
Keep in mind that this write-off doesn't apply to real estate, which has mind-numbing rules of its own. Another caveat: For all other qualifying property, the increased limit only applies this year.
The agency will also provide some help if you are a whistleblower who exposes a tax cheat. If you get an award from the IRS, you may be able to "deduct attorney fees and court costs paid by you."
It's comforting to know that the tax code will bestow some relief upon citizens who try to enforce it. Now if Congress could transform tax preparation into a fair and simple task, that would be preferable.
For more information on how you can take advantage of the Code 179 tax laws complete the information below.

For Free information on more tax saving ideas click here.

Combat Pay Can Count toward Economic Stimulus Payment

Combat Pay Can Count toward Economic Stimulus Payment Eligibility

IR-2008-48, March 20, 2008

WASHINGTON — Military personnel serving in combat zones have the option of including their nontaxable combat pay on their 2007 or 2008 income tax returns if it helps their eligibility for the 2008 economic stimulus payments.

To receive the stimulus payment this year, combat zone personnel or their spouses must file a 2007 income tax return by Oct. 15. Otherwise, they can claim the economic stimulus payment on next year’s income tax return.

“The last thing we want our troops in Iraq or other war zones to worry about are their tax returns. But we do want the troops, and their families stateside, to know they may qualify for the economic stimulus payment,” said Linda E. Stiff, Acting Commissioner of the Internal Revenue Service.

Starting in May, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) plus a $300 payment for each qualifying child younger than 17. The payments are based on 2007 income tax returns. The payments for individuals will begin to phase out starting at $75,000 in adjusted gross income ($150,000 for married couples).

Even individuals and families who normally do not file a tax return because they have no filing requirement may qualify for an economic stimulus payment. They may be eligible for the minimum payment of $300 ($600 for married couples) plus the $300 for each qualifying child younger than 17.

People must have at least $3,000 in qualifying income to get a payment. Qualifying income is defined as any combination of earned income (such as wages or taxable income from self-employment), nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement.

Military personnel who normally would not file an income tax return because their 2007 income is not taxable can file a simple Form 1040A with the IRS if they want to receive the economic stimulus payment. They should report their nontaxable combat pay on Line 40b of the Form 1040A to show at least $3,000 in qualifying income. The Department of Defense lists the amount of excluded combat pay on line 12, box Q of Forms W-2 received by military personnel.

If a military person is serving in a combat zone, his or her normal tax filing requirement is extended until at least 180 days after leaving a combat zone. However, spouses or others with a power of attorney can prepare and file a 2007 income tax return on their behalf so that the stimulus payment is received this year.

The IRS has developed Package 1040A-3, an 8-page publication containing tax tips, a sample Form 1040A and a blank Form 1040A. The package, available at http://www.irs.gov, contains everything needed to file the return immediately.

To ensure that a stimulus payment will be received in 2008, the return must be filed by Oct. 15 to allow sufficient time for processing.

There are a number of special tax code provisions that apply to members of the military serving in combat zones. They include:

· All military pay earned by enlisted personnel or warrant officers is excluded from gross income;

· Monthly pay of up to $6,867.60 earned by commissioned officers is excluded from 2007 gross income.

· All military pay earned by enlisted personnel hospitalized because of injuries sustained in a combat zone is excluded from gross income during the period of hospitalization. The exclusion is limited to two years after the date of the termination of combatant activities in the combat zone.

· Commissioned officers hospitalized because of injuries sustained in a combat zone have a monthly maximum exclusion of $6,867.60 for 2007 and have the same two-year limitation.

· Military personnel who miss a tax filing deadline because they are in a combat zone have 180 days after they leave that combat zone to file a tax return, if they have taxable income.

All the provisions also apply to members of the Reserves and the National Guard.

The IRS reminds filers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges people to file electronically. For people who normally are not required to file a tax return, the IRS and the Free File Alliance have a special program set up to allow for free electronic filing. For those with computer access, IRS Free File –Economic Stimulus Payment is available at IRS.gov.