My Six Biggest Tax Deductions for 2006

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I’ll be starting a brief series this next week or so detailing and explaining the five big income tax deductions I’ll be taking advantage of for 2006 and asking for some help from you all in finding some lesser known, infrequently taken advantage of tax deductions. The five biggest tax deductions for me (and I invite you to share ones that you know of and will be using but that I haven’t yet mentioned) for 2006 will be:

  1. Mortgage Interest
  2. 401k/Retirement Contributions
  3. Energy Tax Credit
  4. Charitable Donations
  5. Lifetime Learning Credit
  6. Business Expenses

Those five are pretty common amongst most people so I’ll just do a little more research into what is involved in each one, the burden of proof (what docments you’ll need in the event that you are audited), and how much each one is potentially worth.

However, as some of you may know, the wealth is found in the long tail, so if you know of any good (legal!) deductions, regardless of how large or small it is, I invite you to share and I’ll probably take the idea and blow it up into a bigger post. Thanks!

{ 8 comments, please add your thoughts now! }

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8 Responses to “My Six Biggest Tax Deductions for 2006”

  1. ChrisCPA says:

    This year there is a little known small tax credit available to virtually EVERYONE for an excise tax charged by the federal government to us on our past telephone bills for long-distane service. This is a dollar-for-dollar reduction of our taxes & here are the eligible amounts:

    For individuals, the credit is taken on line 71 of form 1040. Here are the credit amounts individuals get:

    – $30 if you file as a single person with just you as a dependent.

    – $40 if you file singly and claim a child or a parent as a dependent.

    – $40 if you file as a married couple with no children.

    – $50 if you file as married with one child.

    – $60 if you file as married with two children

    The maximum you can claim as an individual is $60 — except if you have retained all your phone bills from Feb 28, 2003 through July 31, 2006, then you can claim the actual tax as it appears on your bills, as your credit (use form 8913 if you claim the actual tax).

    Businesses have to calculate a formula using form 8913, to determine the amount of the credit due them. The amounts may vary based on the size of the business. Sole proprietors alternatively may take the standard amounts, as below.

    Here is an article that has a little more detail on it, good luck

    [EDIT: Added the link]

  2. jim says:

    Ahhh! Good catch Chris, my friends have been talking about this one a lot lately (everyone has a cell phone) and I wrote about it back when they first announced the safe harbor amount, I hope this is built into TurboTax/TaxCut as a question.

  3. Foobarista says:

    Don’t forget state and local taxes; if you’re deducting mortgage interest, you must be itemizing, so you can deduct property taxes, state and local income taxes (minus last year’s state tax refund, if any), some types of license and car registration fees, etc.

  4. Dus10 says:

    In the latest last minute tax bill that was passed by the ending Republican-controlled Congress, they included a provision that allows you to deduct payments toward PMI as normal mortgage interest. I am not sure if this will be in effect for your 2006 year, though. Luckily, I don’t pay PMI, so no love more me (but it is better that way).

  5. jim says:

    Yeah I saw that, I wonder when that “kicks in.”

  6. Joe says:

    You forgot state and local taxes too.

  7. BryanD.M.M. says:

    You can trake a deduction on your motor home intrest..

  8. Weekly Roundup – 12/15/06

    Here’s a quick look at some of the personal finance articles that caught my eye over the past week.

    Jim talks about his six biggest tax deductions of the year.
    FMF talks about the types of insurance that you need.
    Flexo is amongst the wealthiest 10…

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