New Tax Breaks Will Aid Some Homeowners

Before filing your federal income-tax return, check to see if you're eligible for a few new breaks.

Among them is a deduction for private mortgage insurance premiums. Claim it on Schedule A, line 13. The insurance must be "in connection with home-acquisition debt," the IRS says. Premiums paid on a contract issued before the beginning of 2007 don't count.

Also, there are income limits that prevent upper-income taxpayers from qualifying. The deduction begins to disappear once your adjusted gross income exceeds $100,000 ($50,000 if you're married and filing separately).

If your adjusted gross income is more than $109,000, or $54,500 if married filing separately, you can't deduct any mortgage-insurance premiums.

Separately, a much needed new break could help homeowners with mortgage debt that was forgiven, either partly or entirely, by lenders.  It's easy to overlook this change since it was enacted so recently — and it's tricky.  Here's the gist:

Normally, if a lender forgives your debt, that's considered taxable income to you (although there are several exceptions to this general rule).  Under a law enacted Dec. 20, 2007, known as the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude from gross income debt that was forgiven on their principal residence for "qualified" mortgage debt up to $2 million (or $1 million for a married person filing a separate return).

This exclusion applies to debt forgiven during 2007, 2008 or 2009.  There are many complex details.  For more information, see IRS Form 982 and the instructions at the IRS web site.

Taxes: Do You Have to File?

Don't you hate filing taxes?  Well, millions of people don't even have to file a return.  But if you think that sounds lucky, you might want to think again.

Our Money Talks editor Stacy Johnson explains in this video (runs 1:25) 

If you have a comment or question..leave it for us by clicking on the "comment" link below.  Your email address will NEVER be published here.

Time to Think About Tax Help

We're smack in the middle of tax season again.  Many people fill out the short form, mail it in, and are done with it.  Good for you.  Lots of us have more complicated financial lives.  In many cases, those complications will be handled by a hired tax professional.  But some people really like to do their own taxes.  For you, there's plenty of help online.

When you're ready to file your federal taxes, you can do it online.  The IRS wants more taxpayers to file electronically, so it has teamed up with tax preparation software companies such as TaxCut, TaxAct, and TurboTax.

Together, they offer free e-filing services.  You must meet certain requirements to qualify for free filing.

First, your adjusted gross income must be $54,000 or less.  There are also age and residency requirements, and other criteria may apply.

Start at www.IRS.gov.  Type this address in your browser.  It is the only way to ensure you'll go to the IRS's official site.

Once there, you'll get help choosing software that suits your needs.  Then, you'll be directed to the software company's site.

The software walks you through doing your taxes.  Forget about finding the correct forms.  All you need are your financial papers.  The software performs the calculations for you.  So you're less likely to make math mistakes.

Don't qualify for free filing?  You can still find tax filing software at the IRS's site.  You just have to pay for it, along with e-filing fees.

Don't forget your state taxes!  You may be able to file those with your federal taxes.  Some companies offer free state filing.  But, in many cases, you'll be charged to file your state return.

Make sure your computer's security software is current before preparing your taxes and scan your computer for spyware and other threats.

Remember, criminals love tax season.  Watch for phony e-mail messages purporting to come from the IRS.  Just delete the messages.  Don't click links or call numbers in e-mail.  The IRS will never contact you via e-mail.

Finally, if your taxes are complicated, consult an expert.  Paying for professional help is better than facing an audit!

Rebates: What You Need to Know

Lawmakers have given their final seal of approval to a $170 billion plan intended to spark the slowing economy.  The centerpiece?  Tax Rebates.

Questions abound about how the program will work, and officials at the Treasury Department and IRS are scurrying to work out the details, but for the time being, here are some answers based on currently available government information and experts' analysis.

To be eligible for a full rebate, single tax filers must have 2007 adjusted gross income (AGI) below $75,000 and joint filers must have AGI below $150,000.

Single filers with AGI below $75,000 will get rebates of as much as $600. Couples with AGI below $150,000 will receive rebates of up to $1,200.

In addition, parents will also receive $300 rebates per dependent child; there is no cap on the number of children eligible.

Tax filers who don't owe income taxes because of various credits and deductions but have at least $3,000 in income - which can include Social Security and disability payments - will get $300 rebates per person or $600 per couple.

Your rebate is a one-time tax cut - an advance on a credit you'll receive on your 2008 return.

Treasury Secretary Henry Paulson has said the IRS will start sending out checks in early May.  Previously, he said it should take about 10 weeks to crank out all the checks.  In all likelihood then, you'll see the money sometime between May and early July.

That assumes, of course, that you hit the IRS deadline and file by April 15.  If you're a laggard and have to file for an extension, you'll still get a check but it may not come until the end of the year - probably in time for Christmas shopping.

Tax Notification Scam

Don't fall for the latest email scam that tries to bait you into thinking you're due a refund from the IRS!  It looks something like this:

Internal Revenue Service (IRS)

United States Department of the Treasury
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After the last annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund of $134.80.

Please submit the tax refund request and allow us 6-9 days in order to process it.

A refund can be delayed for a variety of reasons.  For example submitting invalid records or applying after the deadline.

To access the form for your tax refund, click here (with a link to a bogus website that LOOKS very authentic designed to suck your personal information (social security number, credit card and your ATM Pin number right out of you!)

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Regards,

Internal Revenue Service

Document Reference: (92054568).

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This message has been scanned for viruses and dangerous content by MailScanner, and is believed to be clean.

Remember, the IRS will NEVER use email to notify you of a refund, or an audit for that matter.