Leadpct: 0% Pt. size: 9.5 ❏ Draft Userid: ________ DTD INSTR04 PAGER/SGML (Init. & date) Fileid: D:\USERS\8fllb\documents\epicfiles\2007Instructions1040NR.sgm Page 1 of 48 Instructions for Form 1040NR 7:48 - 6-DEC-2007 ❏ Ok to Print The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. 2007 Instructions for Form 1040NR U.S. Nonresident Alien Income Tax Return Department of the Treasury Internal Revenue Service use a different address this year. See Section references are to the Internal Where To File on page 4. Revenue Code unless otherwise noted. General Instructions deduction. The deduction rate for Domestic production activities 2007 is increased to 6%. What’s New for 2007 Unreported social security and Medicare tax on wages. If you are Tax benefits extended. The following an employee and your employer did not tax benefits were extended through withhold social security and Medicare 2007. • Deduction for educator expenses in tax, see Form 8919 to figure and report this tax. figuring adjusted gross income. • District of Columbia first-time Refundable credit for prior-year minimum tax. If you have an unused homebuyer credit. minimum tax credit carryforward from Alternative minimum tax (AMT) 2004, see Form 8801 to find if you can exemption amount decreased. The take this credit. AMT exemption amount is decreased to Health savings account (HSA) $33,750 ($45,000 if a qualifying funding distributions. You may be widow(er); $22,500 if married filing able to elect to exclude from income a separately). distribution made from your IRA to your At the time these instructions HSA. See the instructions for lines 16a ! went to print, Congress was and 16b beginning on page 12. considering legislation that CAUTION New recordkeeping requirements for would increase the amounts above. To contributions of money. For find out if this legislation was enacted, charitable contributions of money, and for more details, see the regardless of the amount, you must Instructions for Form 6251. maintain as a record of the contribution IRA deduction expanded. If you were a bank record (such as a cancelled covered by a retirement plan, you may check) or a written record from the be able to take an IRA deduction if your charity. The written record must include 2007 modified adjusted gross income the name of the charity, date, and (AGI) is less than $62,000 ($103,000 if amount of the contribution. See Gifts to a qualifying widow(er)). U.S. Charities that begins on page 26. You may be able to deduct up to an Exemption for housing a person additional $3,000 if you were a displaced by Hurricane Katrina participant in a 401(k) plan and your expires. The additional exemption employer was in bankruptcy in an amount for housing a person displaced earlier year. by Hurricane Katrina does not apply for 2007 or later years. Standard mileage rates. The 2007 Telephone excise tax credit. rate for business use of your vehicle is This 481/2 cents a mile. The 2007 rate for credit was available only on your 2006 use of your vehicle to move is 20 cents return. If you filed but did not request it a mile. The special rate for charitable on your 2006 return, file Form 1040X use of your vehicle to provide relief using a simplified procedure explained related to Hurricane Katrina has in its instructions to amend your 2006 expired. return. If you were not required to file a 2006 return, see the 2006 Form Elective salary deferrals. The 1040EZ-T. maximum amount you can defer under all plans is generally limited to $15,500 What’s New for 2008 ($10,500 if you only have SIMPLE plans; $18,500 for section 403(b) plans IRA deduction expanded. You may if you qualify for the 15-year rule). See be able to deduct up to $5,000 ($6,000 the instructions for line 8 on page 10. if age 50 or older at the end of the Mailing your return. year). You may be able to take an IRA If you are filing the return for an estate or trust, you will deduction if you were covered by a Cat. No. 11368V retirement plan and your 2008 modified AGI is less than $63,000 ($105,000) if a qualifying widow(er)). You may be able to deduct up to an additional $3,000 if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. Personal exemption and itemized deduction phaseouts reduced. Taxpayers with adjusted gross income above a certain amount may lose part of their deduction for personal exemptions and itemized deductions. The amount by which these deductions are reduced in 2008 will be only 1/2 of the amount of the reduction that otherwise would have applied in 2007. Capital gain tax rate reduced. The 5% capital gain tax rate is reduced to zero. Tax on children’s income. Form 8615 will be required to figure the tax for the following children with investment income of more than $1,800. 1. Children under age 18 at the end of 2008. 2. The following children if their earned income is not more than half their support. a. Children age 18 at the end of 2008. b. Children over age 18 and under age 24 at the end of 2008 who are full-time students. The election to report a child’s investment income on a parent’s return and the special rule for when a child must file Form 6251 will also apply to the children listed above. Expiring tax benefits. The following benefits are scheduled to expire and will not apply for 2008. • Deduction for educator expenses in figuring adjusted gross income. • The exclusion from income of qualified charitable deductions. • Credit for nonbusiness energy property. • District of Columbia first-time homebuyer credit (for homes purchased after 2007).