Tax Tips For 2006 For US Taxpayers

by Mike Godfrey, Tax-News.com, Washington

23 November 2006

The US National Association of Tax Professionals (NATP) has suggested eleven ways in which taxpayers can bring down their tax bills for 2006, especially if they are itemizing. But they must act quickly, as January 1 begins a new year and in most cases, the opportunities will be gone.

Here are the eleven ways to save by acting before December 31, 2006:

• Make an extra mortgage payment before the year is up. The interest you pay is added to your other mortgage interest.
• Give unused items to charity and deduct up to the fair market value. Receipts are needed for all items. Contributions of household items made after August 17, 2006, are not deductible unless they are in good or better condition. If the value of a single item is over $500 you must have a qualified appraisal.
• Have you traveled in connection with charity work? Mileage is deductible at a rate of 14 cents per mile. (You must have kept records of charitable purpose, dates, places, and miles). The value of your services is not deductible.
• Use your full pre-tax medical reimbursement funds that were deducted from your salary. If you don’t use them, you lose them. Spend what’s left for 2006 to stock the medicine cabinet or buy new glasses. While you’re at it, ensure that you have your pre-tax amounts set with your employer for 2007.
• Don’t forget to pay those doctor and dentist bills before year-end if you have enough medical expenses to be able to benefit by using these as an itemized deduction (i.e. paid medical expenses must be greater than 7.5% of your AGI to qualify for a deduction.) (TIP: If funds are short, you can charge to a credit card in 2006 and pay it off in 2007.)
• If eligible, contribute to your IRA (you have until April 16, 2007, to do this one, but don’t forget!). You can also contribute as much as $5,000 to the account of a nonworking spouse over age 50, or $4,000 if under age 50.
• If eligible, set up a Keogh plan by year-end. You have until the tax filing deadline to actually contribute.
• Pay your property taxes by year-end.
• If you are paying college tuition, pay for the spring semester before December 31.
• If you are self-employed, stock up on business supplies before year-end. Save your receipts and take the deduction this year.

“You may be in the alternative minimum tax for 2006 because you already have a substantial amount of these expenses and deductions,” states NATP member, Anthony J. Manziano, CPA, of Woodbridge, New Jersey. “In this instance, the tax benefit for the above noted additional expenses and deductions are a maximum 28%. You should try to determine whether or not you will be in the alternative minimum tax again for 2007. If not, then deferring payment of above expenses and deductions until January 2007 may provide a higher tax benefit if your regular tax rate is expected to be higher than 28%.”

Members of the National Association of Tax Professionals (NATP) work at offices that assist over 11 million taxpayers with tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. NATP has nearly 18,000 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners.

NATP is a nonprofit professional association founded in 1979 to serve professionals working in all areas of tax practice through professional education, tax research, and products. The national headquarters, located in Appleton, WI, employs over 40 staff members.

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