Last-minute Tax Deductions

April 1, 2008

It’s not too late to save on your 2007 taxes, if you act fast.

  • IRA contributions. You have until April 15 to add money to your traditional or Roth IRA. For 2007, you can contribute up to $4,000 ($5,000 if you’re over 50)
  • Mortgage insurance premiums. If you acquired a new mortgage insurance policy on a first or second home in 2007 (either through purchase or refinancing) and have an income below $100,000 (for a married couple), you can deduct premiums for this year. If you financed with a VA or Rural Housing Service loan, you may also deduct prepaid interest for future years through 2010.
  • Dependent care expenses. If you pay someone to care for a child under 13 years old, your spouse, or other dependent so that you can work or look for work, those payments are deductible regardless of your income.
  • Alternative minimum tax exemption. Congress raised the AMT increase to $66,250 for a married couple for 2007 ($44,350 for singles). This is a one-year increase, although a similar provision may be passed before the end of this year.
  • Mortgage forgiveness. If on or after Jan. 1, 2007, you had a portion of a mortgage loan on a principal residence forgiven during a loan restructuring, short sale, or foreclosure, you do not have to declare the first $2 million of forgiven debt as income.