Your home is your best tax shelter and this week’s “5 Tips” by Gerri Willis is focused on finding all those deductions you can use. The tips are pretty much common sense except for #2, which I didn’t know before reading. You should save all the receipts from home improvements and repairs because they can be deducted when you sell the home. So if you replaced your siding and it cost $2,000 then that’s $2,000 you can deduct from the profit of the sale, thus reducing your capital gains tax.

via CNN Money.

Waiting on some 1099’s? Yeah, me too. I think I have a few 1099 forms left from some affiliate programs I was a part of the last year. Advice from the IRS website said that I should wait until February 15th (today) and then give the sender a call if I haven’t received it by then.

But… I don’t actually need the form to complete my taxes because I don’t send them in. All I need need to know how much compensation is listed on the form (the exception is a 1099-R which tells you how much income tax was withheld) and I think I can just look that up.

The IRS website lists a handy guide to what 1099 is what too:

• Form 1099–B, Proceeds From Broker and Barter Exchange Transactions
• Form 1099–DIV, Dividends and Distributions
• Form 1099–INT, Interest Income
• Form 1099–MISC, Miscellaneous Income
• Form 1099–OID, Original Issue Discount
• Form 1099–R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
• Form SSA–1099, Social Security Benefit Statement

More details on the IRS website.

We learned last year that taxpayers who itemize have the option of claiming their state and local income taxes or their state and local sales taxes as an itemized deduction on their 2005 returns and that this year will be the last year you will have that option (on your 2006 returns for your 2005 Tax Year).

The rule is that you can deduct actual state and local sales taxes (actual means you must keep receipts) or you can deduct values taken from the sales tax tables. By using the optional general sales tax tables, you don’t need to keep receipts. When you use the optional tables, you can add the tax on big purchases such as a car, plane, boat, mobile home, or home renovation to the total. So if you read off the table that you are eligible to claim a $779 deduction for sales tax and you just bought a $10,000 car in Maryland, you can add $500 (MD Tax is 5.0%) to the optional table value for a total deduction of $1,279.

Where are the sales tax tables? Where is Publication 600?
The tax tables that were available as Publication 600 last year were rolled into the 2005 Instructions for Schedules A & B (Form 1040) on pages A-10 to A-11.

For more information, please read the press release from the IRS.

H&R Block’s National Tax Advice Day website has a nice concise page listing all the important tax law changes effective in 2005 that you may not have seen, heard, or remembered. The big ones are the new rules regarding energy related tax breaks involving both hybrid/electric cars and your home, charitable giving, and a retirement savings credit. Also be sure to read about the changes to the vehicle donation rules as well.

Get yourself prepared early!

In a press release today, HR Block has announced that their annual H&R Block National Tax Advice will be going digital at NationalTaxAdviceDay.com this year and they’re “offering extensive advice to help people get the maximum refund, understand changes in the law, and get started on their taxes. Hundreds of tips, common and unusual, plus a tax preparation checklist…” This year, National Tax Advice Day falls on january 12th, a day before the IRS permits everyone to e-file their taxes on the 13th of January. In the coming days I’ll be continuing my series on Tax Relief 101 (started last tax season) using the resources made available through this site.

Continue onward for the entire press release.

(read full article…)

With my girlfriend wanting to donate a car, my roommate donating old furniture, and minor cash donations, I thought that I’d do a little research into the rules and procedures governing the deduction of donations from your taxes. It’s a little early, considering 2005 tax returns aren’t due for another ten months (tick tock!), but it’s better to know the procedure before crunch time than scrambling last minute.

(read full article…)

While doing research for my last FSA article, I came upon an article written by Jeff Schnepper that was listing ideas for cutting your 2004 taxes. I skimmed the article, most of which is common knowledge, until I hit upon something called the Schnepper-Malagoli Charitable Tax Grab. You can read the excerpt in full below but essentially you can rent out part of your home tax free (up to 15 days) to a charity (or anyone really), then donate to the charity, and walk away with extra money (and a warm fuzzy feeling) in your pocket as long as there was no pre-arrangement.

(read full article…)