2007 Tax Law Changes

There are several significant changes to the tax code for 2007. This article is a summary of the most popular (or not so popular) changes. There are typical changes that make adjustments for inflation, but there are also changes that affect when you can file your taxes or qualify you for benefits you may have not been qualified for in the past.

Standard Deduction Increase

The standard deductions for individuals have increased to the following:

-Single standard deduction - $5,350
-Married, filing separately standard deduction - $5,350
-Married, filing jointly standard deduction - $10,700
-Head of household standard deduction - $7,850

Earned Income Credit (EIC) Benefits Increase

The amount of earned income to qualify for EIC as well as the benefit itself has increased. Remember that the EIC is a credit, not a deduction. It is directly applied to the amount of tax you owe, or overpaid (refund). Keep in mind that if you are married, you must be filing "married and jointly." If you are filing "married and separately," you will not qualify for the benefit. The amount of earned income you must be below is as follows:

- Two or more children - $37,783 (single) or $39,783 (married/jointly)
- One child - $33,241 (single) or $35,241 (married/jointly)
- No children - $12,590 (single) or $14,590 (married/jointly)

The maximum earned income credit that will be applied to your refund (or amount you owe) will be as follows:

- Two or more children - $4,716
- One child - $2,853
- No children - $428

In addition to these changes, the maximum investment income has increased to $2,900 for all taxpayers. So if you have more than $2,900 in all of your investments combined, you will not qualify.

Alternative Minimum Tax (AMT) Changes

-The alternative minimum tax amount has increased to $44,350 (single), $66,250 (married filing jointly), and $33125 (married filing separate)
-The exemption amount for a child under AMT has increased to $6,300.
-The exemptions for Hurricane Katrina have expired.