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Three tax deductions that expired on Jan 1 this year and were no longer part
of tax law have been renewed by Congress and signed into law by President Bush
this month . But Congress was too late to have the deductions included in the
2006 tax forms. The Internal Revenue Service is now advising taxpayers on how to
take advantage of these deductions for the 2006 filing period. The tax breaks
are for higher tuition costs, educator expenses and state and local sales taxes
in states that don't have income taxes. The IRS is recommending that taxpayers
file electronically through e-file in order to get their refunds faster, and
more importantly, to reduce the chances of making an error compared with
claiming the deductions on the paper 1040 form. Even though Form 1040 will not
be updated for tax year 2006, taxpayers wishing to use the paper form 1040 can
still take the deductions
For the deduction on tuition and fees,
enter "T" on the dotted line to the left of line 35. The educator expense
adjustment can be claimed on line 23 by entering "E" on the dotted line to the
left of line 23. Taxpayers in states with no state income tax who file Form 1040
will receive Publication 600 by mid January instructing them on how to claim the
sales tax deduction.
There is no provision on Form 1040A for claiming these deductions. For those
wishing to file electronically, IRS software will be updated.
The sales tax deduction applies to nine states: Wyoming, South Dakota, Texas,
Florida, Alaska, Nevada, Washington, Tennessee and New Hampshire, and was
claimed on approximately 11.2 million tax returns in 2005. The tuition and fees
provision allows deductions up to $4000.00 and was claimed on about 4.7 million
returns. The educator expense provision for teachers allows deductions up to
$250.00 for personal expenditures on school supplies and was claimed on about
3.5 million returns.
It will be early February 2007 before tax returns claiming these deductions
can be processed. The IRS estimates that there will be approximately 136 million
tax returns filed for tax year 2006.
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