Tax Savings Ideas
Here are some tax ideas that can save you a bundle. The laws are always changing.
Junk Isn’t Deductible
Think twice before trying to deduct that rusty old bike or the tattered clothes you gave to charity. Under the new rules, any household items or clothing you gave away after August 16, 2006, must be in good condition to be deductible.
The rule does not defined good condition. “To be safe, when you give to a charity have them identify on your receipt that the stuff was in good condition,” says Lisa Osofsky, an accountant at Weiser in New York.
To be extra safe, snap pictures of your donations and keep a written inventory.
Get Records of All Cash Gifts
It used to be that you could give up to $250 in cash without proof. But the new rule requires that even small cash gifts given in 2006 must be recorded with a receipt, bank statement or canceled check.
Saving Energy Will Save You Taxes
You may be able to claim a new tax credit for up to $500 if you made energy saving changes in your home, such as replacing old windows or a furnace, or installing central air conditioning. To get the credit, you must save receipts and a copy of the manufacturer’s certification. For a list of home improvements that qualify, check out the Alliance to Save Energy site, www.ase.org/taxcredits.
As in recent years, if you bought a new hybrid car you may qualify for a perk; $250 to $4,000, depending on the fuel efficiency of the car. The IRS keeps a running list of a qualified models and corresponding tax credits at www.irs.gov.
Sales Taxes Are Deductible – Again
Congress extended the option to deduct sales taxes rather than state and local income taxes on federal tax returns. This may make sense if you live in a state with no incomes tax, or if you made big purchases during the year.
Didn’t save receipts? No worry. The IRS calculates estimated sales taxes for you based on your income. You can look yours up online at www.irs.gov. However, if you made unusually large purchases, you can tack them on to the IRS estimates. But in this case, be sure to include receipts.
Tuition Deductions Are Back
Lawmakers also brought back the ability to deduct up to $4,000 in 2006 tuition payments. To qualify, your adjusted gross income cannot exceed $160,000 for couples filing jointly, or $80,000 for singles.
Get Refunds for Phone Taxes
The IRS has not only stopped collecting federal excise tax on long-distance telephone service, it will refund any tax you have paid on service billed to you after Feb. 28, 2003. You may file for the refund on your 2006.
If you don’t want to dig through your records and tally up the taxes you have paid, you can use a standard amount supplied by IRS (check its Website, www.irs.gov). Refunds range from $30 to $60, depending on how many exemptions you claim on your 2006 return.