TAX REBATES

As many of you may have been reading lately, Congressional leaders have reached a deal on a bipartisan economic stimulus package and it is expected to move quickly through Congress.

With politics aside we have been following this stimulus package closely because we see how it will help our clients and taxpayers around the country.   Especially as many people find themselves "upside down" on their mortgages and struggle with small businesses set up to supplement income.

As Congress irons this out, it appears at this time this is how it will work (we will keep you updated if it changes).

The part of this package which will immediately affect all taxpayers is the Tax Rebate.

Individuals who pay income taxes would get up to $600, working couples $1200 and those with children an additional $300 per child.  Workers who make at least $3000 but don't pay taxes would get $300 rebates.

The rebates will phase out gradually for individuals whose income exceeds $75,000 and couples with income above $150,000.  Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates.  The caps are higher for those with children.

HOUSING RESCUE

Another part of the package is set to address the mortgage crisis.  More subprime mortgage holders will be allowed to refinance into federally insured loans by raising the limit on FHA loans from the current $362,000 limit to as high as $725,000.

The availability of mortgages should increase by providing a one-year boost to the cap on loans that Fannie Mae and Freddie Mac can buy.

FLIGHT ATTENDANT AND PILOT DEDUCTIONS

As Flight Attendants and Pilots there are a number of items you will use for your job and required travel expenses which are deductible.  Typically, if you would not normally itemize your tax return to include mortgage interest or property taxes a large part of your itemized deduction would be your Employee Business Expenses.  You do not need receipts for any individual travel expenses less than $75.   You must have a written account of the expense in either a log book or personal organizer showing the date, type of purchase and the amount.   If you would like a list of deductible expenses, please feel free to message us and request one.

Co-Terminal Transportation

 There are several locations which cover more than one airport.  For example: Los Angeles (LAX) also covers Ontario (ONT), Burbank (BUR), Long Beach (LGB), New York cover LGA, JFK and EWR, Washington covers DCA, IAD and BWI.  ..:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />San Francisco, Chicago and Dallas also cover multiple airports.   Transportation from your base to other airports in the city is deductible.  Transportation from your home to your base is not deductible (commuting), but transportation beyond your base is.  For example, if you are based at LAX (where you have your company mailbox) you may deduct

Transportation to ONT, BUR, LGB.

Commuting

 Commuting expenses are NOT deductible.  For instance, commuting to and from home to your base, parking and tolls are not deductible.  If you deduct these expenses, under Audit they would be disallowed.   In some instances you may deduct commuting expenses (transportation/hotel).  An example of this would be when you commute to your base for training, a company meeting, union activity or any other time you are required to be at your base and are not reimbursed for your expense.  Because there are a number of situations which there may be a deductible expense, please feel free to message us if you have any questions.

Per Diem Deduction

Your airline pays you an hourly rate (in most instances) for every hour you are away from your base.  The government allows you a deduction for each day that you are away from your base.  The deduction depends where you layover.  You can either itemize each city or take a standard deduction.  If you fly only domestic it can be to your advantage to use the standard deduction rate.  Once you elect to use a standard rate, you must apply it consistently for the year (you cannot itemize some cities, and use a standard rate on others).

If you fly any international cities (outside the Continental U.S.) it is better to itemize your per diem deduction.  The city rates are higher than the standard rate.  After the deduction allowance is calculated the non-taxable per diem you were paid is subtracted from the allowance.  For example: You have an allowance of $6106 and your airline paid you $3525 you would deduct $2581 which is the difference.  Of that amount you are allowed to deduct 70% (which increases each year up to 80%).

KIDDIE TAX

The government has been tinkering with the kiddie tax.  In the past any child younger then 14 who had more then a certain amount of investment income would have to pay taxes at his/her parents' higher rates.

The kiddie tax age is moving up. For 2007 you will need to consider any potential kiddie taxes for children younger then 18.  In 2008 your college student will be at risk too.

If you are giving your college student money for school, you might want to consider giving them any appreciated long term stock holdings now so they can sell them before the end of this month.   Why ?  The child would get the benefit of his or her capital gains rate which is likely to be 5% this year.  In January, the gain will be taxed at your 15% rate.

TUITION DEDUCTIONS

The deduction for higher-education expenses is set to expire at the end of this year (2007).  It is a popular credit and there is serious talk that Congress still might extend the tax break for tuition deductions and higher education expenses.

Until this extension comes through, you may want to consider paying for any eligible Spring 2008 tuition by the end of 2007.

Individual taxpayers with income less then $65,000 and married couples with income less then $130,000 can deduct as much as $4000 in qualified tuition and related expenses for the taxpayer, spouse or dependents.

HYBRID VEHICLES

One of the most complex tax breaks ever written applies to the Hybrid Vehicle tax credit. The credit is based on a number of factors to claim the credit.  First it is based on the vehicle's estimated fuel savings over its lifetime compared with an index, which means the credit varies on the make, model and year of the vehicle. Additionally, after a manufacturer sells 60,000 cars eligible for the credit, the value of the credit a taxpayer receives phases out and then disappears completely.

This means you can no longer claim a credit for buying a Hybrid Toyota because too many people bought the Toyota Prius in previous years and ..:namespace prefix Toyota met the eligible cars available for credit.  There are only a few days left in this year to purchase a Honda Hybrid Accord.  For example, if you purchase the vehicle before December 31st you will get a $1300 credit on your 2007 tax return. If you buy it in January, the credit will drop to $650, in July it will drop to $325 and will likely be gone before the end of the year.

All is not lost though, if you are looking at Chevy, Mercury, Nissan, Mazda or Ford Hybrids, you have time.  The phase out has not affected these manufactures yet.