Tax Saving Tips For Preparing Your 2007 Return

1. Tax Saving Tips For Preparing Your 2007 Return Advice from CPAs

2. Recent Tax Law Changes • Reduced tax rates, new credits • and increased phase-out limits • Pension Protection Act of 2006 • Amendment of the Economic Growth & Tax Relief Reconciliation Act of 2001

3. Charitable Contribution Changes • IRAs • Distributions from an IRA to a qualifying charity to be excluded from the owner’s income • Limited to $100,000 • Available for a two year period • Must be made after the age of 70 ½

4. Contributions of Capital Gain Real Property for Conversation Purposes • Increased deduction limit of 50% of AGI • Farmers can deduct 100% • Carry forward period of 15 years

5. Tightening the Rules • The deduction from the contribution of • property will be recaptured if the property • is not used for an exempt purpose. • This is effective for contributions made after • September 1, 2006

6. Tightening the Rules, Continued Charitable Contributions of Clothing and Household Items • Clothing and household items must be in “good used condition or better” • The limitation does not apply to any single item of clothing or household goods over the amount of $500 supported by an appraisal • Does not apply to gifts of food, art objects, jewelry, gems or collections. • Effective immediately

7. Tightening the Rules, Continued Recordkeeping Requirements • Gifts of money can be deducted ONLY if it is supported qualifying documentation • Receipts must show: • the name of the organization • date of contribution • amount of contribution • Effective starting August 17, 2006 (calendar 2007 for most individual taxpayers)

8. Other Provisions • Repeals the sunset provision in the 2001 Economic Growth and Tax Relief Reconciliation Act • The exemption from taxation of qualified tuition programs are now permanent

9. Filing Status • Married filing jointly • Married filing separately • Single • Head of Household • Qualifying widow(er)

10. 2007 Tax Rates • 10% • 15% • 25% • 28% • 33% • 35%

11. Standard Deduction • Filing Standard • Status Deduction • Married filing jointly $10,700 • Married filing separately $ 5,150 • Single $ 5,350 • Head of Household $ 7,850 • Qualifying widow(er) $10,300

12. Standard Deduction • Taxpayers 65 and older or blind get an • additional standard deduction • Married - $1,050 • Single or Head of Household - $1,300

13. Itemizing Deductions • An alternative to the standard deduction • Use when these deductions exceed • standard deduction • Phase-out rules apply • -- Single/joint/head of household -- $156,400 • -- Married filing separately -- $117,300 • -- Married filing jointly – • $234,600

14. Personal Exemption Filing Status Phase-out Phase-out starts ends Joint return $218,950 $341,450 Head of Household $182,450 $304,950 Single $145,950 $268,450 Married filing $109,475 $170,725 separately

15. Timing Strategies • Control tax bill by – • Deferring income, such as bonuses • Accelerating deductions, such as • qualified charitable contributions • Bunching deductions that are based on • a percentage of AGI

16. Tax Strategies for Life • Family • Education • Home • Investments • Retirement

17. Family Strategies • Child Credit • Dependent Care Credit • Adoption Credit • Earned Income Credit • Shifting Income

18. Child Credit • Child must be under 17 at year end • Child must be claimed as a dependent • $1,000 credit per child • Reduces tax bill dollar-for-dollar • Phase-out for higher income families • $110,000 for married, filed jointly • $55,000 married, filed separately • $75,000 single filers, heads of households

19. Adoption Credit • Credit of up to $11,390 per eligible child • Exemption for first $11,390 • reimbursed by employer • Parents adopting special needs • child get full credit

20. Dependent Care Credit • Child must be under 13 and a dependent • Tax credit from 20% to 35% • of qualifying expenses • Use up to $3,000 of expenses • ($6,000 for two or more dependents) • to calculate credit • Not restricted to children

21. Earned Income Credit Family Size Maximum Credit Two or more $4,710 children One child $2,853 No children $428

22. Shifting Income • Make gifts to children up to $12,000 • Transfer appreciated stock to children • Hire your children • First $5,350 is not taxed and is a • business deduction

23. Tax Credits • Hope Credit worth up to $1,650 • per student, per year • Applies to first two years of college only • Phase-out applies • Single -- $47,000 -- $57,000 • Joint -- $94,000 -- $110,000

24. Tax Credits • Lifetime LearningCredit of up to • $2,000 per year • Applies to undergraduate, graduate • and professional courses • Phase-out applies • Single -- $43,000 -- $53,000 • Joint -- $87,000 -- $107,000

25. Student Loan Deduction • Deduct up to $2,500 • No need to itemize • No limit on repayment period length • $50,000 to $65,000 – phase-out range • for single filers • $105,000 to $135,000 – phase-out range • for married filing jointly

26. Deductions • Mortgage interest on first and second homes • Up to $100,000 in home equity loan • or line of credit interest • Points paid on mortgage or refinancing • The amortized points from a refinanced mortgage are fully deductible • Real estate property taxes

27. Selling Your Home • Exclude up to $250,000 in capital gains • from sale of home; $500,000 for joint filers • Must own and use home as principal residence • for two out of five years • Eligible only once every two years • Reduced exclusion available

28. Dividends • Top dividend tax rate of 15% • Rate is 5% for taxpayers in 10% and • 15% brackets • Check ex-dividend date • Does not apply to interest payments

29. Capital Gains Tax • Maximum tax rate on long-term gains is 15% • 5% for taxpayers in 10% and 15% brackets • Asset must be held more than one year

30. Offset Capital Gains with Losses • Capital losses offset capital gains • $3,000 ($1,500 for single filers) in net • capital losses can be deducted against • ordinary income • Beware of wash sale rule

31. Employer-Sponsored Plans • Contributions help reduce tax bill • Take advantage of employer matches • $15,000 is 2006 maximum contribution, • $15,500 in 2007 • $5,000 additional contribution for age 50 • and older • New for 2006 – “Roth 401(k)”

32. IRAs • $4,000 is maximum 2006/07 contribution • and $5,000 is maximum for 2008 • $1,000 additional catch-up contribution • for age 50 or older • Phase-out applies to Roth IRA only • Single filers -- $99,000 -- $114,000 • Joint filers -- $156,000 -- $166,000 • Open by April 1, 2007

33. Structure • C Corporation • S Corporation • Limited Liability Company • Partnership • Sole proprietor

34. Expensing Deduction • Deduct up to 100% of the cost of up to • $108,000 in property • Applies to new or used property • Equipment must be put into service by • December 31, 2007 • Now applies to software • Phase-out rules apply • $430,000

35. Additional Business Strategies • Deduct 100% of health insurance costs • if self-employed • Defer income and accelerate deductions • Write off bad debt • Make the most of business-related • deductions – travel, auto, meals and • entertainment, interest expenses

36. Charitable Deductions • Donate appreciated property and avoid • capital gains tax • Donate clothing, household goods, • furniture and deduct fair market value • Volunteer your time and deduct • qualified travel and related expenses

37. FSAs • Reduce taxable income • Use up remaining 2007 balances • Over-the-counter drugs are now allowable

38. Avoid AMT • AMT triggers: • Higher than average dependency exemptions • Large deductions for state and local • income taxes and real estate taxes • High miscellaneous itemized • deductions and medical expenses • Incentive stock options • NYS taxpayers with an AGI of $100,000 can be affected by AMT

39. Training for Success • Focus on tax savings year-round • Consider year-end opportunities • Get help if you need it