Six tips that may help you save on 2007 taxes
The federal tax code may be complicated, but it offers a variety of tax credits and deductions for many taxpayers. You and your tax professional may want to look at the following ways to help lower your tax bill:
1. Deduct your sales tax - Thanks to legislation in 2004, taxpayers who live in states without a state income tax may now deduct sales taxes on their tax returns. Either save your receipts and use exact figures, or use sales tax tables published by the IRS.
2. Be smart about college costs - A variety of tax credits and deductions may be available to you if you meet income limits and are paying the college costs of a dependent or for yourself. If you qualify by income, you may use a $1,500 annual credit for the Hope credit during the student's first two years of school, or annual credit of 20% of tuition expenses up to $2,000 after that for the Lifetime Learning credit. You might also deduct up to $4,000 annually of qualified college expenses instead. You can't take both a credit and a deduction.
3. A loss is a gain - After subtracting your losses from your gains, you can deduct net losses of up to $3,000 annually for investment losses, and may carry over any excess to the following year.
4. Contribute to an IRA - It's not too late to contribute to a traditional IRA. Contributions made before April 15, 2006, may be deductible from your 2005 income tax purposes.
5. It pays to give charity - Charitable tax deductions may be available to you for any qualified donations you made in cash or goods during the past year.
6. Make a point of it - if you refinanced or took a home equity loan last year, the points you paid if the funds were used to improve your home may be tax-deductible. Don't forget that you can also deduct your property taxes and mortgage interest.