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Three deductions that are all-too-easy to miss
Because they are invisible on the tax forms. Congress failed to okay
them for 2006 returns until after the IRS sent the forms to the printer.
1. State sales taxes.
As part of the last-minute tax package last December, Congress resurrected the chance for taxpayers to deduct state and local sales taxes. Although all taxpayers have a shot at this write-off, it makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state income taxes or state sales taxes and, for most citizens of income-tax states, the income-tax deduction is a better deal. You won't find this break mentioned on the tax forms, but here's how to claim this deduction: Enter your write-off on line 5 of Schedule A and write "ST" on the dotted line to the left of that line. IRS even has a calculator on its Web site to help you figure the deduction, which varies by your state and income level.
2. $250 educators' expenses.
This break, too, lost its place on the tax forms because it expired at the end of 2005 and wasn't reinstated until the 2006 forms were set. Still, teachers and their aides can deduct
up to $250 they spent in 2006 for books and classroom supplies. If you qualify, put your deduction on line 23 of the Form 1040, the line now used for the Archer medical savings account (MSA) deduction, and write "E" on the dots to the left. If you also claim the MSA deduction, write "B" (for both) on the line and attach a breakdown of how much you're claiming for each. You get this deduction regardless of whether you itemize.
3. College tuition.
You won't find this one on the forms, either, but you may qualify to deduct up to $4,000
you paid in college tuition in 2006 for yourself, your spouse or a dependent. This break can pay off if your income is too high to qualify to claim the Hope or Lifetime Learning credit.
For 2006 returns, the deduction is taken on line 35 of the Form 1040, the
line for the domestic production deduction. Write "T" to the left of that line. If you're claiming the production break, too, write "B" on the dotted line and attach a breakdown of how much you're claiming for each. You also get to claim this deduction regardless of whether you itemize.
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