The Top 5 Deductions To Take Before December 31st (Refund:Tax Levied For Spanish American War)

LegalZoom ^ | 12/15/06 | Stephanie Paul

[fight_truth_decay]

Although many taxpayers get lost in the myriad of IRS forms and rules (the IRS sends out 8 billion pages of forms and instructions each year) one thing is simple to understand – you don't want to pay high taxes. The good news is you may be able to lower your tax liability.

If you itemize your deductions using a Schedule A, use the five tax strategies below to help lower your taxes and beef up your refund check from dear old Uncle Sam:

1. Charitable Contributions

Charitable contributions are not only good for the community; they are also good for your tax return. Donations of cash, personal property, and time can all be taken as charitable deductions. This includes monetary donations to a favorite charity or religious organization, clothes given to organizations such as the Junior League or Goodwill, and mileage driven for volunteer activities (currently at 14 cents per mile). If you make the donation before the end of the year, you'll reap the benefits even sooner.

While you're cleaning your house for the holidays, consider donating unused items to a local charity for a tax deduction. Donating items such as old clothing, furniture and appliances are perfect ways to lower your tax liability. If your attic is filled with junk that has not been used for years, consider donating it to charity. Taxpayers are entitled to deduct an item's fair market value, which is typically what an item can be sold for in a thrift shop.

For charitable organizations that accept credit card payments, you can charge your monetary contribution before December 31 and take the deduction, even if you don't pay the bill until next year. In addition, if you belong to a synagogue or church that collects yearly membership dues, send in your 2007 payment before the end of 2006. These membership dues are eligible for the charitable deduction.

Just remember to get and keep all receipts from organizations for your good deeds, and keep accurate records of mileage driven for charitable mileage purposes.

2. Prepay Your Mortgage Payment

Another way of accelerating expenses for an immediate deduction on your 2006 return is by prepaying your January 2007 mortgage payment. Homeowners can pick up an extra month's worth of mortgage deductions by paying this installment by December 31. The December interest charge included in the January installment is eligible for a 2006 itemized deduction if the payment is mailed by the end of this year. And in many cases, this one-month interest deduction tax savings is worth several hundred dollars.

Remember, though, that if you make this payment after your lender's 1098 is calculated, you will have to compute the additional interest yourself and add it to the amount reported on your 1098. However, this is usually easy to figure out and the savings are well worth it.

While we're on the subject of homeowner payments, you can also take another year-end tax deduction by prepaying your 2007 property taxes by December 31, 2006. This property tax prepayment is not allowed in all states, so you will need to contact your local property tax collector's office to see if you are eligible. But again, the phone call will be well worth it, since this tax deduction savings for prepaid property taxes can be substantial.

3. Auto Expenses Operating a car is expensive, especially when this 2006 gas prices skyrocketed to over $3.00 per gallon. The good news is that if you use your car for business, you can deduct some of the costs of using it. And as an added incentive in the later part of 2006, the IRS raised the standard mileage rate from 40.5 cents per mile to 44.5. What does this mean for your 2006 tax return? If you use your car for business any time between September 1 and December 31 of this year, you will get the added luxury of deducting 44.5 for each recorded mile driven. This deduction is in addition to all business-related tolls and parking fees.

If keeping mileage records isn't for you, you can keep track of and deduct all of your actual business-related expenses, such as oil changes and repairs. If you use this actual expense method, you can also deduct the depreciation of your vehicle.

4. Prepay Medical Expenses

If your medical expenses exceed 7.5% of your adjusted gross income, you can accelerate 2007 payments for an immediate deduction. This means an individual with an adjusted gross income of $40,000 can deduct medical expenses above and beyond $3,000.

Prepaying your orthodontia bill or your January 1 medical insurance before December 31 is a great way to accelerate expenses. Doctors' visits and prescriptions are not the only medical expenses you can take. Any special equipment or treatments you receive are also deductible. If you have a medical condition that can be helped by a sauna or a whirlpool, those items are deductible.

Deductible medical services can be performed by someone other than your doctor. If you have a condition like a bad back and your doctor says you need a daily massage, this treatment is deductible. However, make sure you get a written note from your doctor saying you need those services.

5. Retirement Accounts Take the time to check your 2006 contributions to your retirement plan. If you haven't made the maximum contribution, consider doing so before December 31. As much as $4,500 can be contributed to a traditional IRA if you are 50 or over and $4,000 if you are under the age of 50. If you have a company-sponsored 401(k) plan, your supplementary contribution may be matched by your employer, adding to the benefits of making additional contributions to your retirement.

If you don't think you can't afford these extra contributions, do some quick calculations. The reduction to your taxable income may actually be higher than the monies contributed.

Accelerating expenses before year-end can add thousands of dollars to your refund check from the IRS. As for all tax issues, contact your tax professional for more information on deductions, or visit the IRS Web site at www.irs.gov.

[fight_truth_decay]

And perhaps you didn't know:
Get your telephone rebate................ If you own a phone (and this includes cell phones), you're entitled to at least $30 back from Uncle Sam. The refund is payback for an old telephone excise tax the government has been making people pay for over a century.

Originally, this tax was levied to help pay for the Spanish American War back in 1898. You'll get up to $60 for families of four or more. Claiming this standard credit will be much easier than digging up your phone bills for the last 41 months and figuring out exactly WHAT you're owed.

More: Energy efficiency etc.

[Jaysun]

The telephone rebate is a neat one. I'd not heard of that. I'll take all I can get. Even so, I'm prepared to be raped.....again. I'm "rich" according to, well, someone.

[Shimmer128]

ping for later reference

[Publius6961]

BUMP

[crazyhorse691]

Thanks for the post. I am working almost as hard to reduce my income tax bite as the "progressives" are trying to increase it:-(

[Broker]

Gift appreciated stocks. Especially if you know not your cost basis. Keep cash & give stock!!!!!!!! Especially before the January correction.

Your charity will have a brokerage account with "DTC" instructions for you to provide to your Financial Advisor (FA). Provide these instructions to your FA in a signed letter of authorization (LOA).

Your FA will be really impressed with LOAs submitted the week after Christmas.

[djreece]

marking

[sheana]

And just think how much richer you would be if you didn't pay all these. Can anyone think of more taxes?

Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax,
Fuel permit tax
Gasoline Tax (42 cents per gallon)
Hunting License Tax
Inheritance Tax
Interest expense
Inventory tax
IRS Interest Charges IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Service charge taxes
Social Security Tax
Road usage taxes
Sales Tax
Recreational Vehicle Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft registration Tax
Well Permit Tax
Workers Compensation Tax

[Jaysun]

One only has to divide the amount coming into the Federal treasury by the number of working people to see how bad we're being reamed. It's a disgusting amount.

[ntnychik]

ping

[Centurion2000]

BUMP

[Centurion2000]

Federal Import Duties
NFA $200 Firearm TAX (Automatic Weapons)

Future Tax

401K Savings Tax (You can BET it's coming after SS collapses)

[Iwo Jima]

Bump for later read.