Familiarize yourself with recent legislation

In a flood of last moment actions in December, Congress passed several bills including:

1. The Tax Increase Prevention Act of 2007, signed into law by President Bush on Dec. 26, 2007. This law extends the Alternative Minimum Tax (AMT) patch for one year, beginning Jan. 1, 2007. The Act increases the AMT exemption amounts as follows:

Single - $44,350
Married filing jointly - $66,250
Married filing separately - $33,125
Head of Household - $44,350

The Act also allows taxpayers to use most nonrefundable personal credits to offset AMT liability in 2007 (as was the case in 2006).

2. The Mortgage Forgiveness Debt Relief Act of 2007, signed into law by President Bush on Dec. 20, 2007. This law provides a permanent exclusion from gross income for discharges of up to $2 million in indebtedness that is secured by a principal residence and that is incurred in the acquisition, construction or substantial improvement of that residence. This relief is available for three years beginning Jan. 1, 2007. The basis in the principal residence is reduced by the amount excluded from income.

3. The Energy Independence and Security Act of 2007, signed by President Bush on Dec. 19, 2007, extends the additional .02 percent Federal Unemployment Tax Act (6.2 percent total) surtax through 2008.

4. The Prevent Taxation of Payments to Virginia Tech Victims and Families Act, signed by President Bush on Dec.19, 2007, excludes from gross income payments made to an individual from a special memorial fund for victims of the Virginia Tech massacre.

Robert Eichten, PFS, CFP® is a director with RSM McGladrey Wealth Management. For more information, contact him at robert.eichten@rsmi.com.

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