Filing
Status

If the taxpayer's filing status is:

The standard deduction is:

If 65 or over AND/OR blind add for EACH

$5,350

$10,700

$1,050

$5,350

$7,850

Nonresident Aliens
An individual who is a nonresident alien for any part of the tax year is not eligible for the credit unless he or she is married and an election is made by the couple to have all of their worldwide income subject to U.S. income tax.

Tax Year

$100 Rule

10% Rule

Apply this rule separately to each spouse.

Apply this rule as if you were one person.

Apply this rule separately to each spouse.

Filing separate IRS tax return

You CAN deduct the following...

You CANNOT deduct the following...

• Admission and transportation to a medical conference relating to the chronic disease of a dependent, if it is primarily for and essential to the care of the dependent 
• Birth control pills prescribed by your doctor
• Capital expenses for equipment or improvements to your home needed for medical care, or to make the home suitable for a disabled person. (See IRS tax Publication 502)
• Cost and care of guide dogs or other animals aiding the blind, deaf or disabled.
• Cost of lead-based paint removal (See IRS tax Publication 502)
• Dental and orthodontic care
• Expenses of an organ donor.
• Hospital services fees (lab work, therapy, nursing services, surgery, etc.)
• Legal abortion
• Legal operation to prevent having children.
• Meals and lodging provided by a hospital during medical treatment.
• Medical, hospital, dental and long-term care insurance premiums (subject to the age limits) (See IRS tax Publication 17 for details).
• Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners.)
• Medicare A premiums for persons not enrolled in Social Security, and Medicare B premiums
• Oxygen equipment and oxygen
• Part of life-care fee paid to retirement home designated for medical care.
• Prescription medicines (those requiring a prescription by a doctor for their use by an individual) and insulin.
• Psychiatric care at a specially equipped medical center (includes meals and lodging.)
• Social Security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (See Wages for nursing services below.)
• Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, braces, etc.)
• Special school or home for mentally or physically disabled persons (see IRS tax Publication 502 for details).
• Stop smoking programs, including cost of prescription drugs designed to alleviate nicotine withdrawal.
• Transportation for needed medical care at the IRS published rate per mile, or actual out-of-pocket expenses, plus parking fees and tolls. (See IRS tax Publication 17 for details).
• Treatment at drug or alcohol center (includes meals and lodging provided by the center.)
• Wages for nursing services ( see IRS tax Publication 502)
• Weight-loss programs to treat obesity and other diseases diagnosed by a physician

• Diaper service
• Diet foods
• Expenses for your general health (even if following your doctor's advice. However if you doctor has recommended a program as treatment for a specific condition, the IRS has indicated that the cost would be deductible) such as

- Health club dues
- Household help (even if recommended by a doctor.)
- Social activities, such as dancing or swimming lessons.
- Trip for general health improvement.
- Weight loss program.

• Funeral, burial or cremation expenses.
• Illegal operation or treatment.
• Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc.
• Maternity clothes
• Meals and lodging while attending a medical conference related to the chronic disease of a dependent
• Medical expenses paid from a medical savings account (MSA).
• Medical expenses paid from a flexible savings account (FSA)
• Medical insurance included in a car insurance policy covering all persons injured in or by your car.
• Medical insurance premiums paid with pre-tax dollars
• Medicine you buy without a prescription.
• Nonprescription drugs or medicines.
• Nonprescription nicotine gum, patches, or lozenges.
• Nursing home policies, if the policy ensures a maximum out-of-pocket expense per day.
• Babysitting, childcare, and nursing care for a healthy baby.
• Payroll tax paid for Medicare A.
• Surgery for purely cosmetic reasons.
• Toothpaste, toiletries, cosmetics, etc.

• Accounting fees for record keeping;
• Expenses of proxy fights when legitimate corporate policies are involved;
• Fees for collecting taxable interest and dividends;
• Fees shown in Box 5 of Form 1099-DIV;
• Guardian fees of a minor incurred in collecting or producing income;
• Investment manager and planner fees to the extent that they relate to taxable income;
• IRA setup and administration fees;
• Legal fees;
• Premiums for indemnity bonds for replacing missing securities;
• Safe deposit box fees used exclusively to hold taxable income generating securities and investments;
• Salaries of persons hired to keep records of your taxable investment income; and
• Subscriptions to investment services.

• The first reduces the amount that can be expensed on the  tax return under this section if taxpayers acquire more than $500,000 in Section 179 eligible property during the tax year. The available $125,000 tax deduction is reduced dollar for dollar for each dollar of Section 179 property placed in service during the tax year above $500,000. If $625,000 of Section 179 property is placed in service the available tax deduction is $0.
• The second limitation is that Section 179 expense cannot be greater than the net income generated by the business for which the property was acquired.

• Unearned income was more than $850
• Earned income was more than $5,350
• Total earned and unearned income was more than the larger of $850 or earned income up to $5,050 plus $300.

• Unearned income was more than $2,150 ($3,450 if 65 or older or blind)
• Earned income was more than $6,650 ($7,950 if 65 or older or blind)
• Gross income was more than the larger of $850 or earned income (up to $5,050) plus $300 PLUS $1,300  ($2,600 if 65 or older or blind)

• Gross income was at least $5 and the spouse files a separate return and itemizes deductions
• Earned income was more than $5,350
• Unearned income was more than $850
• Total earned and unearned income was more than the larger of $850 or earned income up to $5,050 plus $300.

• Unearned income was more than $1,900 ($2,950 if 65 or older or blind)
• Earned income was more than $6,400 ($7,450 if 65 or older or blind)
• Gross income was at least $5 and the spouse files a separate return and itemizes deductions
• Gross income was more than the larger of $850 or earned income (up to $5,050) plus $300 PLUS $1,050  ($2,100 if 65 or older or blind)

If the child is under age 18 and there is investment income of $1,700 or more and  Form 8814 is not filed, the child must file a tax return and include Form 8615.

Maximum Allowable Child and Dependent Care Tax Credit

Qualifications:
The child must be a dependent under age 17 AND -
1. A son, daughter, stepchild, adopted/foster child, brother, sister, stepbrother, stepsister, or a descendent of any of them (i.e. grandchild).
2. Any age if permanently disabled.
3. The child did not provide more than one half of his own support.
4. The child must be a citizen or resident alien.

If there are three or more children an additional refundable credit may be possible even if no tax is owed.

$7,000.00

• $52,000 if the taxpayer's filing status is single, head of household, or married filing separately and he lived apart from his spouse for all of 2007;
• $83,000 if the taxpayer's filing status is married filing jointly and both the taxpayer and spouse are active plan participants, or the taxpayer is a qualifying widow or widower;
• $83,000 if the taxpayer's filing status is married filing jointly and the taxpayer is active plan participant but the spouse is not. The spouse uses the $156,000 threshold;
• $156,000 if the taxpayer's filing status is married filing jointly and the taxpayer was not an active plan participant but the spouse was. The spouse uses the $83,000 threshold; and
• $0 if the taxpayer's filing status is married filing separately and he lived with the spouse at any time in 2007.

These limits will rise through 2009. 

The tax deduction
phases out at...

No tax deduction
is allowed at...

• $180,000
• 100% of the average taxable compensation for the highest three consecutive years, not to exceed $225,000