2007 Tax Deductions Adjusted Upward By IRS

Ever wondered why the various tax deductions available on your 1040 change every year? The answer is inflation and the IRS has just announced the new 2007 figures.

2007 Tax Deductions Adjusted Upward By IRS

In general, tax laws are nasty things. They are complex and the instructions issued by the IRS rarely help in figuring them out. One thing that is in your favor, however, is that many of the fixed tax deductions actually increase in the amount you can claim each year. The reason is tax law is requires the deduction amounts to track inflation statistics.

As is par for the course, the IRS announces the tax deduction adjustments in the last quarter of the year proceeding their change. In the case of 2007 deductions, the new figures are in. Key thing to take not of include the following:

• The value of each personal and dependency exemption, available to most taxpayers, will be $3,400, up $100 from 2006.
• The new standard deduction will be $10,700 for married couples filing a joint return (up $400), $5,350 for singles and married individuals filing separately (up $200) and $7,850 for heads of household (up $300). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
  

• Tax-bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket will be $63,700, up from $61,300 in 2006.

At the end of the day, these may seem like relatively small adjustments and such an assumption is true. That being said, however, every little bit helps when you are figuring out how much you owe each year.