1. State sales taxes. All taxpayers have a shot at this write-off, however citizens of income-tax states must choose between deducting state income taxes or state sales tax. IRS offers a standard sales tax deduction for those who don’t want to save receipts all year. Plus, if you purchased a vehicle, boat, airplane or home building materials, you get to add the state sales tax you paid to the amount shown in IRS tables for your state.
2. $250 educators' expenses. Teachers and aides can deduct up to $250 for books and classroom supplies bought in 2007.
3. College tuition. You may qualify to deduct up to $4,000 in college tuition paid in 2007 for yourself, your spouse or a dependent.
4. Student loan interest paid by Mom and Dad. Until recently, if parents paid back a student loan incurred by their children, no one got a tax break. Now if Mom and Dad pay back the loan, IRS treats it as though they gave the money to their child, who then paid the debt. So, a child who's not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by mom and dad.
5. Out-of-pocket charitable contributions (itemizers only). It's easy to overlook the small out-of-pocket costs you incur for charity, such ingredients for casseroles you regularly prepare or the cost of stamps you buy for your school's fundraiser.
6. Job-related moving expenses. For a first job, if you moved more than 50 miles from your former residence, you can deduct the cost of getting yourself and your household goods to the new area, including 20 cents a mile (and parking fees and tolls) for driving your own car. If a new job is at least 50 miles farther from your old home than your old job was, you can take the same deductions.
7. Military reservists travel expenses. If you are a member of the National Guard or military reserve, you may travel expenses to drills or meetings if you travel more than 100 miles and stay overnight. You can deduct the cost of lodging and half the cost of your meals, plus 48.5 cents a mile (and any parking or toll fees) for driving your own car.
8. Estate tax on income inherited. If you inherited an IRA, you get an income-tax deduction for the amount of estate tax paid on the IRA balance. You apply the deduction when you withdraw from the IRA. (Only itemizers benefit from this, but the tax deduction from a large payout could qualify one to itemize.)
9. State tax you paid last spring. Did you owe tax when you filed your 2006 state tax return in the spring of 2007? Then remember to include that amount with your current state-tax deduction on your 2007 return.
10. Refinancing points. When you buy a house, you get to deduct points paid in the year you acquired a mortgage. When you refinance, though, you have to deduct the points over the life of the loan. In the year you pay off the refinanced loan - because you sell the house or refinance again with a different lender - you may deduct all as-yet-undeducted points.
11. Reinvested dividends. If, like most investors, you have mutual fund dividends automatically invested in extra shares, remember that each reinvestment increases your "tax basis" in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include the reinvested dividends in your basis - which you subtract from the proceeds of sale to pinpoint your gain - means overpaying your tax.
12. Jury pay paid to employer. If your employer pays your full salary when you are on jury duty, but asks for your jury duty pay, remember to deduct this amount from your taxable income. The IRS taxed you for the jury duty pay. :-?
