There’s no time like the present to get the 1-Up on your taxes. If you’re a worker bee like me you should have already gotten your W-2’s back in the mail. Grab your spectacles, open up calculator, and get ready to save extra dollars on your taxes this year with 1mil’s 1up’s 7 Smart Tax Deductions to Save Money
1. Property taxes
2. Sales taxes
3. Charitable taxes
4. Work-related costs
5. Education costs
6. Property losses
7. Medical and dental expenses
1. Benefit from home ownership
Mortgage interest and property taxes are the largest deductions for most people who itemize. You may also be able to deduct “points,” a type of fee paid when obtaining a mortgage.
Make sure you understand the IRS rules for mortgage points and interest.
2. Deduct sales taxes
Thanks to last-minute action by Congress, taxpayers who itemize deductions can still deduct either state and local sales taxes or income taxes on their 2006 returns.
If you choose to deduct sales taxes, you can either:
- add up all of the sales tax you paid, or
- use an IRS table to determine the deductible amount.
Because of the late change, you won’t find the sales tax tables in the Form 1040 instructions the IRS mails you. Nor will these be listed as a deduction option on Schedule A. The IRS has posted the sales tax tables on its website along with an explanation of how to claim the deduction.
3. Add up your charitable gifts
Other than your time, almost anything you donate to a charitable organization is deductible. But don’t get too excited. Used items, like clothes and furniture, generally must be of a certain condition and are only deductible for their fair market value — not the price you originally paid for them. And the IRS has tightened the rules for claiming these deductions. It now requires:
- a receipt for cash donations of more than $250, and an appraisal for noncash contributions valued at more than $5,000.
- copies of checks and receipts for all donated items.
Get more details at IRS.gov.
4. Count work-related costs
If you paid expenses for your job that weren’t reimbursed, you can deduct them — but there’s a catch. You can only claim them if they add up to at least 2 percent of your adjusted gross income.
What qualifies? Such items as:
- Professional dues
- Legal fees related to your job
- Professional books and magazines
- Tools and supplies used in your work
- Required work clothes and uniforms, but only if they aren’t suitable for personal use
- Travel, transportation, entertainment, and gift expenses related to your work
More about deductible work-related expenses at IRS.gov.
5. Make studying — and teaching — pay off
Whether you’re going to school or teaching others you may qualify for two new tax deductions authorized by Congress late last year:
- Out-of-pocket expenses for teachers —Teachers, classroom aides, counselors, and principals can deduct up to $250 for classroom supplies bought in 2006.
- Higher education expenses — Depending on your adjusted gross income, you may be able to deduct up to $4,000 in higher education expenses.
Because these deductions were added at the end of the year, you may need to take special steps to claim these deductions.
Even if you’re not a teacher or student, you may be able to claim unreimbursed education expenses required to do your job.
6. Recover property losses
For items not covered by insurance, you can deduct property losses from theft, vandalism, fires, storms, hurricanes, floods, tornados, and earthquakes.
But the damage must truly be catastrophic. To claim this on your taxes the total loss must be more than 10 percent of your adjusted gross income.
More about disaster and theft losses at IRS.gov.
7. Consider your medical and dental expenses
You can deduct these expenses, but only if they’re more than 7.5 percent of your adjusted gross income. That leaves out most people with an employer-sponsored health plan, unless they’ve incurred heavy out-of-pocket expenses.
Some examples include:
- health insurance premiums (excludes premiums paid by an employer, and pretax premiums you pay)
- fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists
- hospital and laboratory fees
- prescription eyeglasses or contact lenses
- smoking-cessation programs and prescription nicotine-withdrawal drugs (excludes nonprescription gum and patches)
- laser eye surgery
Whether or not all these deductions apply to you, most likely some o fthem will. Be smart and make the Tax Laws work in your favor.
You can also try our H&R Block’s Free Tax Estimator.
[Ref USAA member services]
See other 1-ups!
10 Ways to 1-Up Your Credit Score
5 Ways to 1-Up Your Investment Strategy
