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Taxpayers Should Act Now to Save on 2006 TaxesPosted by SEP-SOLO-IRA-401k-ROTH on: 2006-12-26 10:51:51 in category:
Retirement Headlines [ Print | Permalink / 0 Comment(s) ] Taxpayers Should Act Now to Save on 2006 Taxes PARSIPPANY, N.J., Nov. 22 /PRNewswire/ -- Though the 2006 tax year is rapidly drawing to a close, there are still a number of actions taxpayers can take by December 31, 2006 to put themselves in a more favorable position with regards to their 2006 individual income tax returns. Jackson Hewitt Tax Service(R), an industry leader specializing in federal and state individual income tax returns, offers insights on how factors like year-end payments, energy-efficient purchases, or even cleaning out your closets may all have positive tax implications. "As you prepare to file a 2006 tax return, keep in mind that starting early can help. According to the IRS, over 50 million taxpayers file by the end of February," comments Mark Steber, Vice President of Tax Resources, Jackson Hewitt Tax Service. "There are several steps that taxpayers can take now to claim credits and deductions prior to year end. Thinking about year- end tax planning in terms of three key areas -- namely, what you pay, what you buy and what you give -- can help taxpayers get a head start." What You Pay -- Payments To Make Before December 31 Mortgage Payments: If you pay your January 2007 mortgage payment by December 31, 2006, you may be able to claim the interest portion of the payment as part of your itemized deductions for 2006. Fourth Quarter State Estimated Tax: If you make estimated payments to a state or local government, pay your January 15, 2007, payment before December 31, 2006 -- which will allow to claim that payment on your Schedule A, Itemized Deductions for 2006. College Tuition: Prepay your January 2007 tuition payments for your college students in 2006. This will increase the amount of tuition you may consider for either Hope or Lifetime Learning credits. What You Buy -- Thinking of Buying a New Car or Improving a Home? Buy an Energy-Saving Vehicle: Those planning to purchase a new car should keep new tax credits now available for certain energy efficient vehicles top of mind. If you buy a qualified hybrid or a qualified alternative fuel motor vehicle before January 1, 2007, you may claim a tax credit on your 2006 tax return, up to a maximum of $3,400. Certain restrictions apply. "Although credits are available for tax years 2006 through 2010, be aware that the IRS has set credit amounts specific to each qualified vehicle based on sales criteria," notes Steber. "If you are planning to buy a hybrid vehicle, a tax preparer can help you review the eligible models and assess the tax benefits associated with each." Make Energy Saving Home Improvements: Consider undertaking home repair projects, especially those that improve a home's energy efficiency such as installing a new furnace or energy-efficient windows or doors, before January 1, 2007. There is a credit of up to $500 available for qualified energy- efficient home improvements, as well as other credits available for qualified solar water heating systems and solar panels. What You Give -- The (Tax) Gift of Giving Donate: Making a charitable contribution of money or items is an easy and effective way to lower taxes, provided that you keep receipts for any donations over $250 and that you itemize on your return. Tax benefits associated with charitable donations often go unnoticed, but with more and more people giving money or gently-used items to those in need, there is also an opportunity to deduct the fair market value of donations if you itemize. "The IRS has recently stated that all goods donated after August 17, 2006 must be in good condition to be eligible for a tax deduction," comments Steber. "To make this assessment, donating parties can survey thrift and consignment stores for similar items to determine the fair market value. Another option is to ask a local Jackson Hewitt tax representative about the ItsDeductible(R) program, which accurately values donations in compliance with IRS guidelines to help you secure the biggest possible deduction." Appreciated Property Gifts: Those considering making a cash gift to a college or university may wish to instead consider giving stock that has appreciated in value. It is possible to take a charitable deduction for the fair market value of the asset at the time of the gift, even though you have not paid any tax on the appreciation. Other Helpful Year-End Reminders Salary Reduction Benefits: Job-related benefits such as a flexible spending account or a cafeteria plan offer easy ways to set aside pre-tax money for everyday needs like meals, doctor visits or medications. Most plans call for these funds to be used by December 31 of each year and do not allow for roll-over. Dependent Care Assistance: Many employers offer dependent care assistance to help with the costs of child care. Up to $5,000 can be reserved from your income to cover these costs on a tax free basis. The New Roth 401(k): Starting in 2006, people who are eligible to participate in a 401(k) or 403(b) plan through an employer can designate a portion of the elective deferral to be treated as a Roth contribution. These contributions will be treated as regular income on Form W-2, with distributions from these accounts considered tax-free under the same provisions as a Roth IRA. Taxpayers are encouraged to visit the Jackson Hewitt website (http://www.jacksonhewitt.com/) for additional year-end tax tips and other valuable resources relevant to filing a tax return, such as: * Tax resources and information about new tax laws * A list of items to obtain and organize prior to having your tax return accurately prepared * Information on the "Top Overlooked Deductions" and "Top Overlooked Credits" * Deductions@Work - a proprietary feature that lists job-related credits and deductions for nearly 30 professions * The "What to Bring to Your Tax Preparer" Checklist Many Jackson Hewitt offices around the country are currently open to review previously filed tax returns or provide assistance with year-end tax planning. To find the Jackson Hewitt office nearest to you, call 1-800-234- 1040. About Jackson Hewitt Tax Service Inc. Jackson Hewitt Tax Service Inc. (NYSE: JTX) , with over 6,000 franchised and company-owned offices throughout the United States during the 2006 tax season, is an industry leader providing full service individual federal and state income tax preparation. Most offices are independently owned and operated. The Company is based in Parsippany, New Jersey. More information may be obtained at http://www.jacksonhewitt.com/. To locate the Jackson Hewitt Tax Service office nearest to you, call 1-800-234-1040. |
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