The Early Show

Deductions To Bear In Mind

Brian Dakss

February 22, 2006 / 9:22 AM EST / CBS

Nobody likes paying taxes, but you can cut the amount you owe Uncle Sam by taking deductions and credits.

Money magazine Managing Editor Eric Schurenberg zeroed in on some you don't want to miss this year, in Part Two of The Early Show's "Tax Tips" series.

He selected eight that are either new, offer big savings, or are commonly overlooked.

Schurenberg also brought good news for all late filers: They have two extra days to submit their returns. Because April 15 falls on a Saturday, taxes aren't due until Monday, the 17th.

THREE NEW DEDUCTIONS

For hurricane victims:

You can fully deduct your casualty losses.

You can make penalty-free withdrawals from your IRA, no matter how old you are.

You have three years to pay taxes on your IRA earnings.

For hurricane volunteers:

Any gifts made to charity after Aug. 28 are fully deductible.

If you housed victims for at least 60 days in a row, you can deduct $500 per person, for up to four people.

If you drove to volunteer, you can deduct 34 cents per mile, as opposed to the typical 14 cents.

IRA contributions:

You can contribute $1,000 more than last year. If you haven't fully funded your IRA, you have until April 17 to do so for 2005. The IRA limits for '05 are $4,000 up to age 50, and $4,500 for those 50 and over.

DEDUCTIONS YOU MUST ITEMIZE TO RECEIVE

For homeowners: Last year was the third-busiest ever for home loans. If you bought, borrowed or refinanced, don't forget that you can deduct your origination fees and discount points, in addition to your mortgage interest.

Sales tax: This is the last year you can choose to either write off your state and local income taxes or your sales tax paid for the year. Although most people automatically assume that the income tax option is a bigger write-off, a large purchase such as a car or a boat may tip the scales. Don't forget to add that sales tax to your sales tax for the year when making calculations.

DEDUCTIONS ANYONE CAN TAKE, WHETHER OR NOT YOU ITEMIZE

Child/dependent care credit: If you pay someone to watch kids who are under 13, or elderly family members, you probably qualify for this credit. Costs for a babysitter, a daycare center or even day camp count, though not sleep-away camp. You can reduce your taxable income by as much as $2,100 thanks to this credit.

Student loan interest deduction: If you're still paying off student loans, remember to deduct the interest paid on them. You can deduct up to $2,500.