This week brand new tax rules come into effect that can save you money - that is if you are aware of them. President Bush signed the Tax Relief and Health Care Act of 2006 on December 20th after Democrats and Republicans put aside their election bitterness and overwhelmingly passed a pot pouri of tax breaks that could save individuals and businesses over $45 billion.A press release on the White House website describes the rule: "This Act will extend tax relief for millions of American families and small businesses, and add momentum to our growing economy. It will maintain key tax reforms, expand our commitment to renewable energy resources, make it easier for Americans to afford health insurance, and help open markets overseas for our farmers and small businesses."
There are more than 200 tax rule changes and they are so last-minute that even the Internal Revenue Service did not have adequate time to cover it in the 2006 tax forms. However, many of the measures extend tax breaks that have expired at the end of 2006, which means they are "retroactive," applying to both 2006 and 2007.
Some of the benefits for individuals would be the following: You could chose to deduct state and local sales taxes rather than state and local income taxes. This is a huge bonus for those who live in states where there is no income tax, like Florida and Texas.
Another example is if you were remodeling your home, you could "bunch up" big purchases so they are covered in one year. Installing or adopting energy savings devices are another category included in the tax breaks. Also, parents who have kids in college can deduct up to $4,000 for tuition and fees. This deduction comes in handy to upper-income parents who are not eligible for Hope or Lifetime Learning tax credits.
For people who work in the area of education, a deduction of $250 may be used for classroom supplies that were paid for by personal funds.
Military personnel serving in combat zones may include combat pay to see if they are eligible for earned income tax credit.