Tax tips can save you money on April 15 By Courtesy of H&R Block Sales Tax Deduction
New this year, taxpayers who paid more in state and local sales tax than they did in state income tax in 2004, can choose to deduct the sales tax instead. It's a big win for those living in the eight states without state income tax or for those who purchased big-ticket items such as a car.
If you're one of the millions of Americans who purchased an SUV (or any vehicle over 6,000 pounds) before Oct. 23, 2004, and you use this vehicle at least half the time for business, you can write-off as much as $102,000 on your 2004 return.
If you were walloped in a previous year with the dreaded alternative minimum tax (AMT) because you exercised stock options, you can get a credit for the additional tax when you sell the stock. You can only claim this credit, however, in a year when you aren't subject to AMT.
Unlike an original mortgage, you can't write off all the points paid during refinancing in a single year. But you can amortize the expense by dividing the dollar amount of the points paid by the number of years in your mortgage, then deducting that amount annually until you own the property.
Home Equity Loans
Regardless of what the money is used for, you can deduct all the interest on a home-equity loan of up to $100,000. If you're hit with the AMT, you can claim a deduction for loans used for home improvement only.
Stock for College
Don't sell stock to pay for your child's college tuition. Gift it to your child and have him sell it. He'll be taxed at just 5 percent versus the 15 percent you're likely to pay. Both you and your spouse can gift as much as $11,000 per year tax-free.
If you own stock or bonds in a company that stopped doing business and has no intention of restarting operations, you can deduct your cost basis in the stock or bond. If you owned the security in a tax-deferred account like an IRA or 401(k), the loss is not deductible.
Home Office Deduction
You may be able to claim a portion of your home as a home office if it's used exclusively and regularly for business. Occasional or incidental use is not sufficient for a home office deduction.
There are many myths about requesting an extension to file. The most common myth is that an extension to file is an extension to pay. It's not. If you file an extension, you must estimate your tax liability for 2004 and submit payment for your balance due by April 15 or suffer penalties and interest.
Avoiding An Audit
Failing to sign the return and incorrectly writing your Social Security number can trigger an audit. Check the return before sending; better yet, e-file � it's quicker and you'll be notified of an error within 24-48 hours enabling you to correct the mistake and resubmit. E-filed returns are 99 percent more accurate vs. 81 percent for paper returns.