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With the New Year fast approaching, there are a number of year end Internal Revenue Service (IRS) tax provisions that you should keep in mind in order to save the most money on your tax return come April. If you wait until after December 31, you may miss on some of these tax breaks.
<b>Teachers</b>: If you haven't been keeping track of your schools supply receipts, you'll want to search for any that you can find, or make a year end trip to stock up on supplies you know you'll need. The $250 tax deduction that teachers could take for school supplies they bought with their own money actually expired at the end of 2003. This may have caused you to stop keeping track. The good news is that Congress enacted it again this year and you can once again make the $250 deduction for 2004.
This is an especially valuable tax break since you don't need to itemize your tax return to claim it. Expenses that qualify include books, computer equipment, supplies, and supplementary materials used in the classroom. The deduction is limited to instructional materials, so prizes and stickers you by as rewards don't qualify.
<b><A HREF="http://www.savingadvice.com/forums/showthread.php?t=2784">Sales Tax Deductions</A></b>: A new law was enacted this year that allows you to choose between deducting your state and local taxes or your sales tax if you itemize your tax return. For the seven states that don't have state taxes (Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming), this is a no brainer. For everyone else, you'll have to compare the two in order to know which is to your benefit.
Since this law was enacted late in the year, most people won't have their sales tax receipts for the entire year. To help with this situation, the government will be releasing tax tables based on income, number of dependants, filing status and state of residence that you can use in place of receipts. You'll have the choice to use your own receipts or the <A HREF="http://www.savingadvice.com/forums/showthread.php?t=4053">state tax tables</A>.
This new deduction can especially benefit taxpayers that purchased a car or boat this year (or plan to before the end of the year). The law provides that taxpayers that purchased big ticket items such as cars and boats (possibly with more high priced items added later) can deduct the actual sales tax paid on the purchase in addition to the amount listed in the IRS tables. If you don't have your receipt for your auto purchase, go to the dealership where you purchased the vehicle to get a duplicate.
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<b>Car & Boat Donations To Charities</b>: The IRS caught on that people were giving cars and boats to charities and claiming inflated deductions when the cars and boats were selling for much less. Many donated vehicles are sold at auction for prices far less than what donors were claiming on their tax returns. While you can still claim the fair market value of a car or boat you donate to a charity this year, starting next year you'll only be able to deduct the amount that the charity actually sells the vehicle for no mater what the fair market price indicates. If the fair market for your car is $2000 according to published price books, but the charity sells the car for $800, you are only entitled to an $800 deduction starting January first.
If you won't be able to donate your vehicle before December 31, one way to get around this new law is to donate your vehicle to a charity that will use it as part of their operation or give it to someone that will use it. If the car is not sold, then you'll still be able to deduct the fair market value on your taxes even after January 1.
<b>Itemizing Deductions</b>: It pays to figure out whether or not you'll be itemizing your deductions for 2004 or taking the standard deduction. This is especially true for couples who thought they may have a "marriage penalty" of a lower standard deduction. The marriage penalty law was extended to give married couples a larger standard deduction in 2004 and 2005.
If you know that you'll be itemizing for this year's taxes, you may want to try and pay as many deductible expenses as you can before the end of the year. You can pay some 2005 bills such as your January mortgage payment and any real estate taxes due in January before the end of December. This will allow you to add these to your itemized deductions in 2004 and thus maximize them.
In addition, you may decide to make some extra charitable contributions before December 31. It may be wise to also do a house cleaning and <A HREF="http://www.savingadvice.com/forums/showthread.php?t=1492">donate any items you no longer need</A> to your local Good Will or Salvation Army. If you'll be taking the standard deduction this year, then holding off on these payments until the beginning of 2005 makes sense.
By taking the time to go over your federal taxes before January first arrives will give you the chance to make sure you don't miss any of the deductions you qualify for this year.
<b>Teachers</b>: If you haven't been keeping track of your schools supply receipts, you'll want to search for any that you can find, or make a year end trip to stock up on supplies you know you'll need. The $250 tax deduction that teachers could take for school supplies they bought with their own money actually expired at the end of 2003. This may have caused you to stop keeping track. The good news is that Congress enacted it again this year and you can once again make the $250 deduction for 2004.
This is an especially valuable tax break since you don't need to itemize your tax return to claim it. Expenses that qualify include books, computer equipment, supplies, and supplementary materials used in the classroom. The deduction is limited to instructional materials, so prizes and stickers you by as rewards don't qualify.
<b><A HREF="http://www.savingadvice.com/forums/showthread.php?t=2784">Sales Tax Deductions</A></b>: A new law was enacted this year that allows you to choose between deducting your state and local taxes or your sales tax if you itemize your tax return. For the seven states that don't have state taxes (Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming), this is a no brainer. For everyone else, you'll have to compare the two in order to know which is to your benefit.
Since this law was enacted late in the year, most people won't have their sales tax receipts for the entire year. To help with this situation, the government will be releasing tax tables based on income, number of dependants, filing status and state of residence that you can use in place of receipts. You'll have the choice to use your own receipts or the <A HREF="http://www.savingadvice.com/forums/showthread.php?t=4053">state tax tables</A>.
This new deduction can especially benefit taxpayers that purchased a car or boat this year (or plan to before the end of the year). The law provides that taxpayers that purchased big ticket items such as cars and boats (possibly with more high priced items added later) can deduct the actual sales tax paid on the purchase in addition to the amount listed in the IRS tables. If you don't have your receipt for your auto purchase, go to the dealership where you purchased the vehicle to get a duplicate.
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<b>Car & Boat Donations To Charities</b>: The IRS caught on that people were giving cars and boats to charities and claiming inflated deductions when the cars and boats were selling for much less. Many donated vehicles are sold at auction for prices far less than what donors were claiming on their tax returns. While you can still claim the fair market value of a car or boat you donate to a charity this year, starting next year you'll only be able to deduct the amount that the charity actually sells the vehicle for no mater what the fair market price indicates. If the fair market for your car is $2000 according to published price books, but the charity sells the car for $800, you are only entitled to an $800 deduction starting January first.
If you won't be able to donate your vehicle before December 31, one way to get around this new law is to donate your vehicle to a charity that will use it as part of their operation or give it to someone that will use it. If the car is not sold, then you'll still be able to deduct the fair market value on your taxes even after January 1.
<b>Itemizing Deductions</b>: It pays to figure out whether or not you'll be itemizing your deductions for 2004 or taking the standard deduction. This is especially true for couples who thought they may have a "marriage penalty" of a lower standard deduction. The marriage penalty law was extended to give married couples a larger standard deduction in 2004 and 2005.
If you know that you'll be itemizing for this year's taxes, you may want to try and pay as many deductible expenses as you can before the end of the year. You can pay some 2005 bills such as your January mortgage payment and any real estate taxes due in January before the end of December. This will allow you to add these to your itemized deductions in 2004 and thus maximize them.
In addition, you may decide to make some extra charitable contributions before December 31. It may be wise to also do a house cleaning and <A HREF="http://www.savingadvice.com/forums/showthread.php?t=1492">donate any items you no longer need</A> to your local Good Will or Salvation Army. If you'll be taking the standard deduction this year, then holding off on these payments until the beginning of 2005 makes sense.
By taking the time to go over your federal taxes before January first arrives will give you the chance to make sure you don't miss any of the deductions you qualify for this year.
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