Update for 2007 federal income tax returns

Army Lawyer, Dec, 2007

The Hope Scholarship and Lifetime Learning Credits are two separate educational credits available to taxpayers and their dependents. (54) The Hope Scholarship Credit is authorized for money spent on qualified tuition and related expenses (55) during the first two years of a student's post-secondary education. (56) For 2007, the maximum amount for the Hope Scholarship Credit is $1650. (57) This amount consists of 100% of qualified tuition and related expenses not in excess of $1100 plus 50% of those expenses in excess of $1100, but not more than $2200. (58) Alternatively, the Lifetime Learning Credit applies to the expenses paid for any level of higher education. (59) The taxpayer is allowed to take 20% of costs up to $10,000 of qualified tuition and related expenses for a maximum of $2000. (60) For 2007, both these credits are reduced once the taxpayer's adjusted gross income reaches between $47,000 and $57,000 for all single, head of household, and married filing separate fliers. (61) Married filing jointly taxpayers will have these credits reduced when the adjusted gross income is between $94,000 and $114,000. (62) Finally, these credits are eliminated for single taxpayers whose adjusted gross income is $57,000 or more, and for married filing jointly taxpayers whose adjusted gross income is $114,000 or more. (63)

Second, taxpayers adopting an eligible child (64) can receive a credit for qualified adoption expenses which include reasonable and necessary adoption fees, court costs, attorney fees, and other expenses directly related to the adoption of the eligible child. (65) The taxpayer can take this credit either the year after the expenses are incurred or in the year the adoption is completed. (66) For 2007 the maximum credit allowed for adoption expenses is $11,390. (67) This credit, however, reduces once a taxpayer's adjusted gross income exceeds $170,820 and is completely phased out once a taxpayer's adjusted gross income reaches $210,820 or more. (68)

Finally, the Additional Child Tax Credit and the Earned Income Tax Credit have new minimum and maximum income levels for 2007. First, the minimum amount of earned income used to figure the Additional Child Tax Credit for 2007 is now $11,750. (69) This is an increase from the 2006 amount of $11,300. (70) On the other hand, the maximum amount a taxpayer may earn before they are disqualified from the Earned Income Credit has increased to $37,783 if the taxpayer has more than one qualifying child and is a head of household filer and $39,783 if the taxpayer is married filing jointly. (71) If the taxpayer has one qualifying child the taxpayer must earn less than $33,241 if filing head of household and $35,241 if filing married filing jointly. (72) Finally, if the taxpayer does not have a qualifying child, the taxpayer must earn less then $12,590 if filing single and $14,590 if married filing jointly. (73) Also, the amount of the earned income credit has increased for 2007 to $2853 if the taxpayer has one qualifying child, $4716 if the taxpayer has more than one qualifying child, and $428 if the taxpayer does not have a qualifying child. (74)