Heads Up On Tax Deductions

Ready to file your taxes? Before you sign those returns, there are a few changes you need to know about. Stephanie Au Werter, Deputy Editor of SmartMoney.com, breaks down the top five.

First, remember the telephone refund. If you talk on the phone - cell phone or landline - you've got a tax treat coming your way this year. It's a little refund that for most folks will be between $30 and $60. The deal here is that consumers were charged a tax on their long distance bills from parts of 2003 through August 2006. Turns out that tax should not have been applied, so you've got some money coming to you.

Don't forget home energy credits. If you made energy efficient home upgrades last year, you could be eligible for a pretty generous tax credit. Just how much you'll get depends on what exactly you did. If you installed energy efficient windows, the credit could be up to $200 - an air conditioning system, up to $300. This is a special deal for 2006 and 2007 - so if you didn't take advantage of this last year - you still have time to make these changes this year, and then take the tax break in next year's return.

One thing to keep in mind is that there are tougher rules on donated goods this year. You no longer can take a donation for basically donating your trash to a charity. The items must now be in good condition - this seems reasonable - and you have to keep a list of every item you donated and reasonable estimate how much it was worth.

Saving money in your kids name? There are some tougher rules this year. These are rules that are in place that prevent parents from saving money in their child's name and enjoying their lower tax rate. So the deal is that if your child had unearned income of more than $1700 last year - well, you need to be aware of the kiddie tax. Here's what's new: this used to apply to kids who were under age 14. Now it applies to kids who are under age 18.

Finally, some tax breaks from last year have been renewed at the last minute. The Republican Congress extended some tax breaks at the end of last year. This includes the college tuition deduction - that's $4,000 - and a deduction for teachers to write off school supplies that they buy. If you're eligible, make sure you take advantage of these breaks!

For more tax tips and other personal finance information, click here.
By Stephanie Au Werter
  • Erin Petrun

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