It seems to be a little less painful year for many taxpayers who are preparing their 2007 returns.

Most filers will get special payments from the government due to the economic stimulus plan , in addition the deductions will be clearly marked on the 2007 forms.
There is also a new deduction for mortgage insurance.

On the down side there are tough new record keeping rules for charitable donations.

Here are the major changes and the effect on our income:

Stimulating payments.

The Treasury is planning to distribute 112 billion in economic-stimulus payments to individuals starting in May.
To get our payment we need to file the return for 2007.
Many upper income families won't benefit much because of income limits ( phase out begins for individuals at $75,000 and for married couples filing jointly at $150,000.00

Mortgage Insurance

This new deduction will help people who purchase and paid for mortgage insurance during 2007.
Of course not everyone is eligible. The deduction begin to phase out once the adjusted gross income exceeds $100,000. It also does not apply to mortgage insurance contracts issued before 2007.

Clearer deductions.

Some taxpayer that do not use software to prepare for taxes will find easier to claim deductions fro 2007 than one year ago.Among them is the one that allows taxpayers who itemized deductions to choose to deduct their state and local sales taxes instead of state and local income taxes.

Charitable Donations

You required to have documentation for all charitable cash contributions no matter how little they are. Examples are bank record, such as a canceled check or a statement showing the name of the charity,date and amount or a detailed written receipt.

Mortgage Debt Relief

Debt forgiveness usually result in taxable income but in the new law taxpayers may exclude debt forgiven on their principal residence if the balance on their loans was less than 2 million ( the limit is $ one million for a married person filing a separate return). *( See IRS Form 982)

There is an electronic and paper version of the form 982. The official encourage to file electronically because it means faster refunds and fewer errors.

Mileage Rate

If we used our car to work we have a choice to deduct our actual cost or relying on the IRS standard rate.
( from 44.5 cents a mile in 2006 rose to 48.5 cents a mile for 2007).

The AMT

The AMT has grown rapidly in recent years and now the people effected by it have rose significantly.
Last year , Congress took some measures to prevent for addition people to be caught on the AMT for 2007.
Unless Congress change the rule again , 26 million people will be hit by the AMT for 2008, up about four million for 2007 and 2006.

Standard deduction.

The basic standard deduction for 2007 rose to $10,700 for joint filers from $10,300 for previous years.
For most singles , it's $5,350 for 2007 ,up from $5,150.
There are additional amounts for those who are 65 or older, or who are blind.
Nearly two thirds of all filers claim the standard deduction instead of itemizing.