That New Tax Laws May Have a Positive Impact on Their Bottom-Line This Tax Filing Season
PARSIPPANY, N.J., April 9, 2008 // PRNewswire-FirstCall // -- According to Jackson Hewitt Tax Service(R), homeowners who either purchased of refinanced their homes in 2007 will find two noteworthy provisions available to them when filing their taxes -- a new deduction for mortgage insurance premiums paid in 2007 and a new rule for mortgage debt that was forgiven last year. These tax breaks, along with other credits and deductions, make homeownership one of the most significant areas for tax benefits.
"The new mortgage insurance deduction and debt forgiveness provisions are good examples of how homeownership can pay off at tax time," comments Mark Steber, vice president of Tax Resources at Jackson Hewitt Tax Service. "Coupled with other home-related benefits, such as credits for home improvements and deductions for mortgage interest and real estate taxes, homeowners may see great tax savings this filing season. We encourage homeowners to visit a knowledgeable tax preparer to learn more and claim all of the credits and deductions they may be entitled to due to their homeownership."
For the 2007 tax year, homeowners can treat qualified mortgage insurance premiums as tax deductible if they were paid on a policy entered into after December 31, 2006, and before January 1, 2008, and if other requirements are met. The deduction is reduced by 10 percent for each $1,000 over $100,000 in adjusted gross income (AGI) for most taxpayers. The deduction is reduced by 10 percent for each $500 that AGI exceeds $50,000 for those who choose the Married Filing Separately status. For example, a married couple filing jointly, with an AGI of $101,000, paying qualified mortgage insurance premiums of $5,000 last year, is allowed a mortgage insurance premiums deduction of $4,500. Taxpayers should also note that qualified mortgage insurance premiums can be deducted for rental properties purchased or refinanced in 2007.
Thanks to the Mortgage Forgiveness Debt Relief Act of 2007 (signed into law on December 20, 2007), taxpayers with mortgage debt that was partly or entirely forgiven during 2007 can claim special tax relief and not have their debt forgiveness treated as taxable income if the debt forgiven was for a principal residence and the balance of the loan is less than $2 million ($1 million for Married Filing Separately). The law applies to debt that was reduced through mortgage restructuring as well as mortgage debt that was forgiven in connection with a foreclosure.
"Taxpayers can take advantage of this option when filing a 2007 tax return, but they should know that because this was a late-breaking change, some tax software may not reflect this update. However, the preparers at Jackson Hewitt are aware of this provision and can assist filers with any questions about debt forgiven last year," said Steber.
The Energy Tax Incentives Act of 2005 is another tax time benefit available to homeowners who made certain home renovations to improve energy efficiency in 2007. Tax credits vary based on the type of improvement, but qualified energy efficiency improvements and qualified residential energy property costs have a total lifetime limit of $500.
The interest on mortgages (including a second mortgage), home equity lines of credit and home equity loans is also deductible in the tax year that it is paid.
In addition, real estate taxes may be deductible if they are charged uniformly against all property in the jurisdiction and if they are based on the assessed value of your home. However, taxes charged for improvements made to public areas and property such as streets, sidewalks and sewer lines cannot be deducted.
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with approximately 6,800 franchised and company-owned offices throughout the United States during the 2008 tax season, is an industry leader providing full service individual federal and state income tax preparation. Most offices are independently owned and operated. The Company is based in Parsippany, New Jersey. More information may be obtained at http://www.jacksonhewitt.com. To locate the Jackson Hewitt Tax Service office nearest to you, call (800) 234-1040.
SOURCE Jackson Hewitt Tax Service Inc.