Tax Time

Tax Breaks are trickier but you get 2 extra days

January 28, 2007|By Eileen Ambrose

Sun Columnist — Arm yourself with sharp pencil and an eraser. Make that two erasers.

That?s because filing taxes is a little trickier than usual this year.

Congress last month extended some tax breaks, but not in time for the printer. No lines appear on returns to take deductions on sales tax, college tuition and classroom supplies. You?ll have to claim those on lines for other deductions.

And if that doesn?t confuse you, then a one-time phone tax credit just might. Some tax breaks are making a first appearance: Limited tax-free IRA distributions for charitable donations and credits for making your home energy efficient.

And there?s a push to help taxpayers, especially those low- to moderate-income, to save. A saver?s credit destined to disappear after this season is now permanent. And filers can have their refunds split and directly deposited in up to three accounts, including an IRA.

Luckily, the usual tax deadline falls on a Sunday, so you have more time to file. The deadline for Marylanders: April 17.

INCOME

Line 15 a and b

IRA distributions Filers 70? and older can withdraw up to $100,000 tax free if money goes directly from an IRA to a charity. Put charitable distribution on line 15a. Put ?0? on line 15b

ADJUSTED GROSS INCOME

Line 23

Archer MSA deduction Teachers K-12 can deduct up to $250 for school supplies paid out-of-pocket. Write ?E? to the left of entry if taking only the education deduction. Put ?B? if also claiming the Archer MSA deduction, and attach a statement showing how much you?re claiming for each.

Line 32

IRA deduction Income limit raised for joint filers, widows and widowers who are covered by a retirement plan but contribute to a traditional IRA. Full or partial deduction available if adjusted gross income is under $85,000.

Line 35

Domestic production activities deduction Deduct up to $4,000 in college tuition and fees. Eligibility: Singles with adjusted gross income of up to $65,000 and joint filers with income up to $130,000. Filers with higher incomes, but not exceeding $80,000 for singles and $160,000 for joint filers, can deduct up to $2,000. Write ?T? to the left of entry if only taking tuition deduction; put ?B? if also claiming deduction for domestic production activities. Attach a statement on how much you?re claiming for each.

TAX AND CREDITS

Line 44

Tax The ?kiddie tax? on investment income now applies to children under age 18. Parents may report a child?s investment income on their return after filling out Form 8814. Report a child?s interest, dividend and capital gains distribution on the appropriate lines in the income section; report the tax here.

Line 45:

Alternative minimum tax Exemption increased to $42,500 for singles and $62,550 for joint filers. About 3.5 million filers will pay AMT, and not all will be rich. You may owe it if you take lots of deductions. Find out if you?re one of them at AMT Assistant at www.irs.gov or use the instruction booklet worksheet.

Line 51.

Retirement savings contribution credit Claim a saver?s credit of 10 percent to 50 percent of contributions to an IRA, 401(k) or other retirement account. Maximum credit is $1,000 for singles, $2,000 for joint filers. Eligible: Singles with adjusted gross income of $25,000 or less; joint filers with income up to $50,000.

Line 52:

Residential energy credits Claim a credit of up to $500 for energy-saving home improvements, including insulation, exterior doors and windows and electric heat pumps. Get a credit worth up to $2,000 for adding solar panels or a solar water heater.

Line 55

Other credits Get credit for buying a new hybrid or alternative-fuel vehicle. Credit size varies; on Toyota Prius, for example, it?s $3,150 if you bought before October and $1,575 after that.

Line 71

Credit for federal telephone excise tax paid This year only, recoup taxes you paid on long-distance phone calls since early 2003. Standard credit: $30 for one person, $40 for two, $50 for three and $60 for four or more. Or, claim actual taxes paid, if you have records, by also filling out Form 8913. Use 1040EZ-T if only filing a return to get the credit.

REFUND

Line 74:

Amount to be refunded Fill out Form 8888 to split your refund and have it directly deposited into two or three accounts.

SCHEDULE A

Line 5

State and local income taxes Deduct either state sales taxes paid last year or state and local income taxes. Use actual sales tax paid or estimate given in Publication 600. If deducting sales tax, write ?ST? to the left of your entry.

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