As you may or may not know, Congress extended certain tax breaks late in 2006, but not in time for the IRS deadline for inclusion in 2006 tax forms. Thus, these deductions don’t appear on the IRS forms or in the instructions booklets. Here are the key changes:
Sales tax: You have the option of deducting state sales taxes you paid last year or the amount you shelled out in state and local income taxes. Congress re-instated this deduction for 2006 and 2007 after it had expired in 2005.
Classroom expenses: Teachers from kindergarten through high school may deduct the cost of school supplies they pay for with their own money. This deduction, worth as much as $250, has been revived for 2006 and 2007.
Higher education tuition and fees: This deduction, worth as much as $4, 000 of tuition and fees paid to colleges or other post-secondary schools, is back for 2006 and 2007. The maximum deduction is available to single filers with adjusted gross income of $65, 000 or less and joint filers with income of as much as $130, 000.
While most tax prep software should be updated, people filing their returns on paper need to be extra careful not to miss out on these tax breaks. According to the IRS, they won’t start processing returns claiming these deductions until February 3rd. For additional details, check out the IRS press release.