’tis the season for tax breaks

December 12, 2006 at 6:27 pm Leave a comment

The U.S. Congress just approved the Omnibus Tax Bill that is full of tax breaks. According to USA Today, anyone purchasing a home after Dec. 31st can deduct mortgage insurance premiums in 2007. What is mortgage insurance? When home buyers have less than a 20% down payment, have to pay insurance to protect lenders in case of default. It typically costs about a half of a percent (one-half of 1%) of the mortgage or approximately $75 a month for a $180,000 loan.

So, if you buy a home after Dec. 31st, you become eligible to deduct $300 to $500 in 2007. What’s the catch? This deduction expires December 31, 2007. You can’t claim deductions of those premiums after 2007. In the end, the mortgage insurers will gain much more from this bill than taxpayers. One year of deductions for years of insurance premiums. Yay!

Other tax breaks:

  • Congress extended state and local tax deductions through 2007–Taxpayers can deduct sales taxes instead of state income taxes on their federal returns.
  • Tuition deduction–Up to $4,000 for college tuition and related costs. Available for single taxpayers with adjusted gross income (AGI) of up to $65,000 or less. Available to married couples with AGI of up too $130,000 or less. Single taxpayers with an AGI of up to $80,000 and married couples with an AGI of up to $160,000 can deduct up to $2,000. (Above the line deduction; dont need to itemize to claim it)
  • Classroom expense deduction–Teachers and other education workers can deduct up to $250 in out-of-pocket expenses. (Above the line deduction)
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Entry filed under: Taxes.

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