MADISON—Last minute federal changes to the Alternative Minimum Tax (AMT) saved more than 20 million taxpayers from being affected by the additional tax. The increase in the AMT exemption amount was one of the most significant of the income tax law changes for 2007. Additional new rules for filers of 2007 state and federal returns may affect parents, educators, students, low- and middle-income filers, and those planning for retirement, according to the Wisconsin Taxpayers Alliance (WISTAX). Explanations of these changes and "plain-English" instructions for filing federal and state tax returns are available in Taxes08, WISTAX’s pocket tax guide. WISTAX is a nonprofit, nonpartisan organization dedicated to public-policy research and citizen education.

In late December, Congress raised the AMT exemption amounts for married filers to $66,250 and for single filers to $44,350. The exemption amounts were $62,250 and $42,500 in 2006 but were scheduled to drop to $45,000 and $33,750 in 2007, affecting millions more taxpayers than the previous year. While this change occurred after printing of Taxes08, included in the publication are all other relevant federal changes, such as new deductions for mortgage insurance premiums, an increase in the earned income credit, Medicare Part D premium deductibility, and verification requirements for charitable contributions.

State of Wisconsin income tax changes include an increase in the college tuition deduction and an end to Wisconsin’s acceptance of the federal educator deduction for expenses.

Along with detailed explanations of the changes, and easy-to-understand instructions for filing federal and state individual income tax returns for 2007, Taxes08 has information on other federal, state, and local taxes.

Changes in Wisconsin's state income taxes for tax year 2007 include:

•  References to the Internal Revenue Code were updated, with certain exceptions, to the provisions in effect as of December 31, 2006. 

•  For Wisconsin tax purposes, the federal educator expenses deduction (up to $250) is not allowed.

•  The maximum deduction for tuition expenses is increased to $4,843 per student (up from $4,536 in 2006).

Federal Income Tax Changes

Among changes affecting federal taxes for the 2007 tax year are:

•  The Alternative Minimum Tax (AMT) exemption amount for single filers is $44,350 ($66,250 if married filing jointly).

•  The adoption credit increases to $11,390 (was $10,960)

•  The Retirement Savings Contribution Credit (up to $2,000 if married filing jointly).

•  The minimum annual deductible on qualifying high-deductible health plans for Health Savings Accounts (HSAs) increases to $1,100 ($2,200 for family coverage).

•  All charitable contributions, regardless of amount, must be verified with a bank record or a receipt from the charity.

•  The rate for business use of a vehicle in 2007 is 48.5¢ per mile.  The rate for medical reasons or for moving expenses is 20¢ per mile.  The charitable giving rate is 14¢.

Taxes08 can be purchased directly from the Wisconsin Taxpayers Alliance, 401 North Lawn Avenue, Madison, Wisconsin, 53704-5033. The single-copy price is $3.75 (including sales tax). Quantity discounts are available. Contact WISTAX at (608) 241-9789 or wistax@wistax.org for prices.