The end of the year means it will soon be tax time and there are some changes coming your way when you file your 2006 return.
Here are some of them:Everyone who paid tax on their long-distance phone service between Feb. 28, 2003 and July 31, 2006, will receive a tax credit between $30 and $60 depending on the size of your family. No documentation is required and you can file for this credit even if you don’t have to file a regular return, by completing form 1040EZ-T.
A 70-and-a-half-year-old person can now give a $100,000 charitable gift from their traditional IRA in 2006 and 2007 without paying a tax on the withdrawal. Prior to this, they would have had to pay $25,000 in federal tax alone.
Speaking of charitable gifts ... the IRS now wants receipts on everything, so put a check in the collection plate instead of cash.
If you give items worth more than $500 like a washer, dryer, TV or something to Goodwill, St. Vincent De Paul or the Salvation Army, you must send an appraisal along with your return. Your personal exemption increases from $3,200 to $3,300.
Kindergarten through 12th grade teachers no longer get their $250-“above the line”-deduction for items they buy for the classroom with their own money. This was worth $38 on a tax rate of 15-percent.
Bad news for college students: “above the line” tuition and related fees deductions for education have been eliminated. Now only the “hope” and “lifetime learning” credits are available.
The deduction for state and local sales tax in lieu of state and local income taxes, has not been renewed. This is important for Kentucky taxpayers who made several major purchases, like cars or Tennessee taxpayers who do not have a state income tax.
A new $500 maximum lifetime non-refundable credit is available for 2006 and 2007 for energy efficient home improvements like water heaters, air conditioners and windows bearing the “energy star” label.
And people called to active duty for at least 179 days will be able to take penalty-free distribution from IRA’s and other qualified plans.
Be sure to consult your tax preparer for other changes.