For your 2006 Tax Returns - 10 don't-miss tax breaks

This article explains the recent changes for 2006 tax return (especially the top 2 items) some of the items have very detailed instructions as where to put down on your returns.

CNNMoney.com

10 don't-miss tax breaks

Wednesday February 14, 11:45 am ET

 

By Jeanne Sahadi, CNNMoney.com senior writer

 

As annual rites go, sweating over your 1040 is one of the most taxing, no pun intended.

So to make the venture a little more palatable -- and maybe even profitable -- we asked Thomas Riley, president of the New York State Society of Certified Public Accountants, and Mark Luscombe, principal federal tax analyst for tax information publisher CCH, to help us draw up a tickler list of valuable (and in some cases new) tax breaks worth remembering before signing off on your federal and state tax returns.

 

1. Get back your phone tax

 

Thanks to the recent repeal of a 3 percent long-distance excise telephone tax, you have a refund coming to you on your 2006 tax return whether you itemize or not.

 

The one-time refund covers the 3 percent tax that you've paid from March 1, 2003 to July 31, 2006. If you don't feel like combing through old bills to tally your total, the IRS will let you claim a standard amount based on your exemptions:

 

1 exemption: $30 refund

 

2 exemptions; $40 refund

 

3 exemptions: $50 refund

 

4 or more: $60 refund

 

(If you opt for the standard amount, claim it on line 71 on the 1040. If you want to do the calculations yourself, fill out Form 8913.)

 

2. Take credit for being efficient

 

Tax year 2006 is the first for which you can get a tax break for making your home more energy efficient.

 

You can take a 30 percent credit up to $2,000 for the cost of solar water heating or photovoltaic equipment in your home. You can get a 10 percent credit up to $500 for insulation and heat-reducing metal roofs, and up to $200 for energy-efficient windows. Labor costs, though, don't count.

 

(For more information, see IRS Form 5695. The credit is entered on line 52 on the 1040.)

 

3. Write off the nanny

 

If you work full-time and pay for care of a dependent (e.g., a young child, elderly parent or disabled adult child or spouse), you can get a credit for the amount you spend above what you get back through your company's flexible spending account.

 

Depending on your income, you're allowed to claim between 20 percent and 35 percent on up to $3,000 in extra expenses for one dependent or $6,000 for two or more. So the maximum credit you can claim would be $1,050 for one dependent and $2,100 for two or more.

 

(For more information, see IRS Form 2441 or IRS Publication 503. The credit is entered on line 48 on the 1040.)

 

4. Get money back for saving

 

Saving for retirement can result in a lower tax bill in more ways than one. If your AGI is $25,000 or less ($50,000 or less for married couples), you may take up to a 50 percent credit on as much as $2,000 in contributions made to qualified retirement savings plans, such as 401(k)s, 403(b)s and traditional and Roth IRAs. The closer you are to the income ceilings, the lower your credit will be.

 

That credit is on top of the deduction on your income that you get for making contributions to a 401(k), 403(b) or deductible IRA.

 

(For more information on the saver's credit, see IRS Form 8880. The credit is entered on line 51 on the 1040.)

 

5. A break for self-employed savers

 

If you're self-employed, you may contribute up to 25 percent of your self-employment income (gross income minus expenses) to a SEP (Simplified Employee Pension) and deduct the full amount.

 

You're allowed to create and contribute to this IRA-type plan up to the due date of your return -- which, with extensions, can be as late as Oct. 15, 2007.

 

(For more information, see IRS Form 5305A-SEP. The deduction is entered on line 28 on the 1040.)

 

6. Miscellaneous deductions

 

Among the miscellaneous deductions you may be eligible to take:

 

Travel costs for job interviews: If you interview for a job in your field, you may deduct the costs of transportation, food and lodging.

 

Phone use: You may deduct business calls made on a personal cell phone and work-related long-distance calls made on your home phone.

 

Subions for work-related publications

 

Dues for professional association memberships

 

Miscellaneous deductions may be claimed if combined they exceed 2 percent of your adjusted gross income (AGI) and you itemize on your return. But only the amount above 2 percent of your AGI is deductible.

 

(For more information, see IRS Form 2106. These deductions are entered on Schedule A.)

 

7. Pick your state tax

 

You may either deduct your state and local income taxes on your federal return or the state and local sales taxes you paid, whichever is higher. If you don't have all your receipts, you can use the Optional State Sales Tax Tables in IRS Publication 600.

 

(The sales tax deduction is claimed by entering "ST" on line 5 of Schedule A.)

 

8. Save on tuition

 

You can take a deduction for qualified higher education expenses whether you itemize or not. It may be taken on up to $4,000 in tuition and fees if your adjusted gross income is $65,000 or less ($130,000 for joint filers). If your AGI is higher ($80,000 or less for single filers; $160,000 or less for married couples), you may deduct up to $2,000.

 

The tuition deduction may not be taken for expenses for which you are claiming an education credit (e.g., the HOPE or Lifetime Learning credits).

 

(For more information, see IRS Topic 302. The deduction is entered on line 35 on the 1040.)

 

9. Real estate tax deduction

 

If you bought property and reimbursed the seller for the portion of property taxes he paid for the year, you may deduct that amount on your return, unless you're subject to AMT, which disallows property tax deductions.

 

(This deduction is entered on Schedule A.)

 

10. Save on 529 savings

 

Some states offer an income tax deduction to residents for contributions they make to a 529 plan. To see if yours does, visit SavingForCollege.com.

所有跟帖： 

• thanks! -nelsonma- ♀ (0 bytes) () 02/15/2007 postreply 15:23:58