Tax Tips

Social Security Update

Benefits will increase by 3.3% in January.  You won’t see all this in the check, because your Medicare B premium rises from $88.50 to $93.50.  The increase is less than expected, but check out the next paragraph!

Medicare B Surcharge

In 2007 Medicare B premiums will increase on a sliding scale for some.  The new program looks at your 2005 income.  If it was over $80,000 ($160,000 for couples) you will pay a “surcharge” of $12.50 monthly for Medicare B coverage.  Surcharge can reach $68.60 monthly for incomes over $200,000 (couples $400, 000).  Surcharge doubles in 2008, triples in 2009.  Each year’s figure is based on your income from two years earlier.

2007 Wage Base to $97,500

Workers will pay full social security taxes on the first $97,500 of income in 2007.  At this level, an employee pays a whopping $7,458.75 – and employer matches this dollar for dollar!  Self-employed persons are considered to be their own employer, so they can pay the full $14,975.50.  Above the $97,500 ceiling only the 1.45% Medicare tax is imposed.

Hybrid Car credits – Toyota & Lexus Phasing Out 

First-time buyers of hybrid and alternative fuel vehicles earn tax credits ranging from $250 to $3,400.  A tax credit is a direct reduction of your tax bill.  As of late in October, 38 different vehicles had been approved for the credits.  However, the credit for a given vehicle declines after the manufacturer sells a combined total of 60,000 of all its qualified models.  

            Toyota (which also makes Lexus) reached this figure in September.  As a result, Toyota or Lexus vehicles get only 50% of the approved credit through March 2007.  For the next 6 months the credit drops to 25% of the approved figure.  After this, the credit is gone.  No other auto-maker has yet sold 60,000 hybrid vehicles.  You can look up the credit amounts and the approved list at www.irs.gov – simply type “hybrid car” in the search box.

Saving for Retirement?

If you are trying to sock away enough for a comfortable retirement, there’s good new for 2007.  The amount you can contribute goes up in January.  Here are the figures for 2007:

Plan Type                  Maximum Contribution             50 & up, may add

401(k), 403(b),                        $15,500                                               $5,000

or 457                                     

SIMPLE                                  $10,500                                               $2,500

SEP                                         $45,000                                               N/A

Keogh                                      $45,000                                               N/A

IRA, Roth                                $4,000                                                 $1,000

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