xcel
11-26-2006, 11:11 AM
How about adding some tax breaks to your Christmas shopping list? (http://www.boston.com/business/taxes/articles/2006/11/26/10_ways_to_cut_your_taxes_and_avoid_traps_before_the_end_of_the_year/)
http://www.cleanmpg.com/photos/data/501/05_hybridescape.jpgLeonard Wiener - Boston Globe - Nov. 26, 2006
2007 FEH could be worth up to $2,600 off your 2006 Federal Income taxes.
Though there are only a few weeks left in the year, there may still be time for tax-saving maneuvers if, for example, you buy a new home furnace, spring for a hybrid car, or get new investments to replace battered ones.
"Good planning involves reviewing both new opportunities and the changes in old ones," says Bob Scharin, a senior tax analyst at RIA, a publisher of tax guides for accountants and others.
Here's where you can start:
Think local. Massachusetts taxpayers may want to check out their Bay State return (massdor.com) for a reinstated deduction on certain commuting expenses in excess of $150. There is also a boost for 2006 in the personal exemption amount - such as to $7,700 from $7,150 for couples filing jointly. And people eligible to claim state tax benefits for home heating and energy conservation who didn't fully claim benefits last year may be able to take a deduction or credit for 2006.
Energy boost. New on the federal return (irs.gov) is tax credit of up to $500 for part of the cost of conserving energy by upgrading such items as heating and cooling equipment, windows and doors, and insulation. If the items are certified by the maker as qualifying, each $1 of credit saves $1 of tax.
Other federal twists:
Updating investments. Pruning stocks that have lost value can save taxes and be a smart investing strategy, says Ed Smith, a partner in Boston at the accounting firm BDO Seidman. Selling dogs before year-end can generate a 2006 loss to offset capital gains and up to $3,000 of this year's wages and other income. Dumping poor performers with dim prospects also lets you reinvest in better holdings, he says.
Driving green. Buyers of hybrid cars starting this year can get a credit of $250 to $3,150 against their income tax, based on the model. But the credit phases out for a car maker when its overall hybrid sales top 60,000. That has happened at Toyota, with the credit for current buyers of a Toyota Highlander hybrid, for example, set at $1,300, down from $2,600 on purchases earlier in 2006.
Saving for retirement. People who qualify to put money into Individual Retirement Accounts have until the April 2007 tax return filing deadline to make deposits that count for 2006. The maximum is up to $4,000 with an extra $1,000 allowed to people 50 or older. A married couple can save up to double the caps, even if only one spouse is employed.
Deposits to a traditional IRA are tax deductible, but you face tax when money is taken out. Deposits to a Roth IRA are not deductible, but withdrawals are typically tax free.
Self-employed people with SEP retirement accounts or certain Keogh plans may be able to deposit as much as $44,000 for 2006, tax deductible.
Managing deductions. People who itemize deductions can choose to lower 2006 taxable income by making in December charitable gifts, purchases of business equipment, and other deductible expenditures that had been planned for early next year.
But people hit by the alternative minimum tax, a separately figured levy that some people pay, should be careful. Trying to boost 2006 deductions by pre-paying the final estimated payment of 2006 state tax before the end of the year, for example, can backfire since that state tax isn't deductible when calculating AMT.
Kiddie tax. A nasty surprise could hit parents of children with investment income. Before this year, part of the investment income of a child under 14 could be taxed at the parent's higher tax rate if the income exceeded a cap --$1,700 for 2006. Effective this year the potential extra bite applies though age 17.
"Parents of older children may have to think about coming up with cash to pay that additional tax," cautions Donna LeValley, a New Jersey attorney and an editor at "J. K. Lasser's Your Income Tax." To keep a child's future investment income in check, she advises favoring long-term growth, deferred income, and possibly tax-exempt interest.
No area codes needed. Don't miss a new tax form line to claim a rebate of up to $60 in telephone excise tax following the Treasury Department's concession that it erroneously collected a 3 percent levy on long distance calls.
The government will refund some of that tax, and people who accept a standard amount of $30 to $60 won't have to dig up past bills or show they called long distance. The amount is based on the number of personal and dependent exemptions claimed on the 2006 return. Self-employed people and other business filers will follow special rules.
People who aren't required to file a regular tax return can use a special 1040EZ-T form to get the rebate.
Waiting for Congress. Some breaks that expired at the start of 2006 will be revived if Congress follows through on plans to retroactively reinstate them.
Included is a deduction of up to $4,000 for college tuition, as an alternative to the Hope and Lifetime Learning tax credits, and a deduction of up to $250 for teachers who buy classroom supplies. (Even if reinstated federally, Massachusetts will not revive the two deductions for 2006 state tax.) Also in limbo: The option to claim an itemized deduction for sales tax instead of state income tax.
No excuses. With a newly militant Internal Revenue Service it's wise to remember that you can outsource the preparation of your return, but not the responsibility. You're liable for extra tax, interest, and a possible penalty whether you goof-up a return yourself or errors appear on one professionally done, cautions IRS spokeswoman Peggy Riley.
Whether tracking evasion or innocent mistakes, commissioner Mark Everson said last week that the agency is re-sharpening its teeth after enforcement was "gutted" following a bashing during congressional hearings in 1997 and 1998. Increased and better targeted audits - double the rate of six years ago - and more forced collections "have restored the credibility of our enforcement programs," he declared.
Among the people getting special attention are the self-employed, but we don't know if that includes Santa.
http://www.cleanmpg.com/photos/data/501/05_hybridescape.jpgLeonard Wiener - Boston Globe - Nov. 26, 2006
2007 FEH could be worth up to $2,600 off your 2006 Federal Income taxes.
Though there are only a few weeks left in the year, there may still be time for tax-saving maneuvers if, for example, you buy a new home furnace, spring for a hybrid car, or get new investments to replace battered ones.
"Good planning involves reviewing both new opportunities and the changes in old ones," says Bob Scharin, a senior tax analyst at RIA, a publisher of tax guides for accountants and others.
Here's where you can start:
Think local. Massachusetts taxpayers may want to check out their Bay State return (massdor.com) for a reinstated deduction on certain commuting expenses in excess of $150. There is also a boost for 2006 in the personal exemption amount - such as to $7,700 from $7,150 for couples filing jointly. And people eligible to claim state tax benefits for home heating and energy conservation who didn't fully claim benefits last year may be able to take a deduction or credit for 2006.
Energy boost. New on the federal return (irs.gov) is tax credit of up to $500 for part of the cost of conserving energy by upgrading such items as heating and cooling equipment, windows and doors, and insulation. If the items are certified by the maker as qualifying, each $1 of credit saves $1 of tax.
Other federal twists:
Updating investments. Pruning stocks that have lost value can save taxes and be a smart investing strategy, says Ed Smith, a partner in Boston at the accounting firm BDO Seidman. Selling dogs before year-end can generate a 2006 loss to offset capital gains and up to $3,000 of this year's wages and other income. Dumping poor performers with dim prospects also lets you reinvest in better holdings, he says.
Driving green. Buyers of hybrid cars starting this year can get a credit of $250 to $3,150 against their income tax, based on the model. But the credit phases out for a car maker when its overall hybrid sales top 60,000. That has happened at Toyota, with the credit for current buyers of a Toyota Highlander hybrid, for example, set at $1,300, down from $2,600 on purchases earlier in 2006.
Saving for retirement. People who qualify to put money into Individual Retirement Accounts have until the April 2007 tax return filing deadline to make deposits that count for 2006. The maximum is up to $4,000 with an extra $1,000 allowed to people 50 or older. A married couple can save up to double the caps, even if only one spouse is employed.
Deposits to a traditional IRA are tax deductible, but you face tax when money is taken out. Deposits to a Roth IRA are not deductible, but withdrawals are typically tax free.
Self-employed people with SEP retirement accounts or certain Keogh plans may be able to deposit as much as $44,000 for 2006, tax deductible.
Managing deductions. People who itemize deductions can choose to lower 2006 taxable income by making in December charitable gifts, purchases of business equipment, and other deductible expenditures that had been planned for early next year.
But people hit by the alternative minimum tax, a separately figured levy that some people pay, should be careful. Trying to boost 2006 deductions by pre-paying the final estimated payment of 2006 state tax before the end of the year, for example, can backfire since that state tax isn't deductible when calculating AMT.
Kiddie tax. A nasty surprise could hit parents of children with investment income. Before this year, part of the investment income of a child under 14 could be taxed at the parent's higher tax rate if the income exceeded a cap --$1,700 for 2006. Effective this year the potential extra bite applies though age 17.
"Parents of older children may have to think about coming up with cash to pay that additional tax," cautions Donna LeValley, a New Jersey attorney and an editor at "J. K. Lasser's Your Income Tax." To keep a child's future investment income in check, she advises favoring long-term growth, deferred income, and possibly tax-exempt interest.
No area codes needed. Don't miss a new tax form line to claim a rebate of up to $60 in telephone excise tax following the Treasury Department's concession that it erroneously collected a 3 percent levy on long distance calls.
The government will refund some of that tax, and people who accept a standard amount of $30 to $60 won't have to dig up past bills or show they called long distance. The amount is based on the number of personal and dependent exemptions claimed on the 2006 return. Self-employed people and other business filers will follow special rules.
People who aren't required to file a regular tax return can use a special 1040EZ-T form to get the rebate.
Waiting for Congress. Some breaks that expired at the start of 2006 will be revived if Congress follows through on plans to retroactively reinstate them.
Included is a deduction of up to $4,000 for college tuition, as an alternative to the Hope and Lifetime Learning tax credits, and a deduction of up to $250 for teachers who buy classroom supplies. (Even if reinstated federally, Massachusetts will not revive the two deductions for 2006 state tax.) Also in limbo: The option to claim an itemized deduction for sales tax instead of state income tax.
No excuses. With a newly militant Internal Revenue Service it's wise to remember that you can outsource the preparation of your return, but not the responsibility. You're liable for extra tax, interest, and a possible penalty whether you goof-up a return yourself or errors appear on one professionally done, cautions IRS spokeswoman Peggy Riley.
Whether tracking evasion or innocent mistakes, commissioner Mark Everson said last week that the agency is re-sharpening its teeth after enforcement was "gutted" following a bashing during congressional hearings in 1997 and 1998. Increased and better targeted audits - double the rate of six years ago - and more forced collections "have restored the credibility of our enforcement programs," he declared.
Among the people getting special attention are the self-employed, but we don't know if that includes Santa.