The New Tax Laws You Should Know About Before Filing

For this current tax season, there are some new tax laws that every single person should be aware of prior to filing their return. During the last year, a couple of tax bills were passed that brought out certain tax relieves and new tax burdens for the self employed as well as members of the general public.

It is going to be a more complicated year for filing taxes when the tax professionals have devoted a lot of their precious time making sure that they are abiding the laws related to taxation. The breakdown of the latest twists in the tax law has been explained below:

· No Deduction for Alternative Minimum Tax (AMT): The childcare payments and the mortgage interest will not be deducted any further from the gross income while calculating.

· Clean Fuel Deduction on Energy Efficient Cars: The Tax Credit concept has replaced the clean fuel deduction of $ 2000 that had existed in the last year. The tax credit in this issue will vary depending on the model of the car purchased. As per the law, each manufacturer of the car will be able to sell not more than 60,000 fuel efficient cars prior to the deduction gets started for a yearlong phase out.

· Tax Relief for Singles and Married Couples: As per the new tax law, there is a tax relief for a single person earning more than $ 150,000 and for a couple jointly earning more than $ 225,000. Moreover, the rate at which the deduction has been framed out for the high earners, has been lowered down by one-third for the year 2006-2007.

· Increment in The Contribution Limit: As per the newly formulated tax law the 401 (k) and 403(b) the retirement contribution limit has increased from $ 1000 to $ 15,000. For the persons who are above 50 year of age the limit of the catch-up contribution has also increased from $1,000 to $5,000.

· Telephone Excise Tax: The telephone excise refund is just for every one. As per the law the taxpayers are allowed to claim a standard refund on the basis of the number of personal exemptions that have been paid by them. The rates, however, vary as per slabs such as, for a single exemption the taxpayers can claim the standard refund of $ 30. For a couple of exemptions the taxpayers can claim the standard refund of $ 40. For three exemptions the taxpayers can claim the standard refund of $ 50 and for four or more exemptions the taxpayers can claim the standard refund of $ 60.

· The Kiddie Taxation: This is a new law that had been enacted during mid 2006. According to this law, the kids' investment income over $ 1700 will be charged at the tax rates of the parents until the children reach 18 years of age. The parents who are using the older versions of the kiddie tax, (according to which the children's investment income used to be taxed at the lower rate from the age group ranging between 14 year to 18 years) are not going to get the benefit of this perk.

· Deduction of Local and States Sales Tax: This is not a new perk at all, but while going through some of the IRS forms and publications, it might be thought that the option to deduct the local and the state sales tax is not available to the general public. This not true actually. The congress has amended the law and re-enacted the breakdown of the same during the month of December - long after the IRS had printed and issued the materials. This, however, made it easy for the taxpayers to choose for the deduction either the state income tax or the state and the local sales tax paid by them, whichever will be reckoned to be higher.

This particular scheme turns out to be quite lucrative for the taxpayers who have got their permanent residential addresses in the States and who among them do not levy any tax. On the contrary, the expert tax professionals do not agree as to whether the taxpayers in the states who are charged with the income tax will be benefited from opting to deduct their sales tax. For the senior citizen section of the society this scheme proves to be quite effective as this can make a difference to the senior citizens who bank upon the retirement income.