Since 2006 was an election year, it's not surprising that lawmakers spent much of it creating and adjusting tax laws. Now, as taxpayers put these new measures into practical effect by filing their annual returns, many will find changes that produce some nice tax savings.
Tax-law winners range from environmentally conscious homeowners and motorists to teachers and college students. Even folks who simply rang up long-distance friends and family get a tax break this year.
Other taxpayers, however, will find some of the changes costly. Americans who work abroad are likely to end up with a larger tax bill this year. So are parents who opened investment accounts in their children's names.
To help you determine whether you'll be a winner or loser in this year's annual filing game, check out these 10 tax changes. Even if they don't apply to your 2006 return, they could give you a head start in planning your 2007 tax-saving strategy.
|These major changes in the tax code can make a difference for people filing their 2006 returns -- or doing their 2007 tax planning.|
|Some will help you save money, while a few could cost you, in paperwork as well as cash.|
1. Telephone tax credit
One of the most welcome tax changes comes not from Congress but from the Internal Revenue Service, which decided last year to stop collecting the 3 percent federal telephone excise tax. That charge on long-distance calls originated in 1898 to help pay for U.S involvement in the Spanish-American War. While that war ended after just three years, the tax continued to show up on phone bills.
Unfortunately, despite the phone tax's long history, the rebate is only for taxes paid on long-distance service after Feb. 28, 2003, and before Aug. 1, 2006. Still, every taxpayer is eligible to get cash back, without having to prove that they actually had phone service during the applicable rebate months.
Even better, you don't have to dig out your old phone bills, presuming you still have them, to come up with the amount you paid years ago. The IRS has calculated average phone tax costs based on the total number of taxpayer exemptions. If you claim one exemption you'll get $30 back; the refund is $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.
To get the refund, simply enter your applicable amount on the new line found on all three individual 1040 forms. If you don't have to file a return this year, the IRS has a special form for you, the 1040EZ-T, that you can use to get back your phone tax money. And if you do happen to have all your old phone bills and they show taxes greater than the IRS-figured amount, you can get that larger refund by filing Form 8913.