Don’t miss out on deductions and credits — they’re free money!
• Tons of people are invested in international mutual funds these days, and could be missing the foreign tax credit reported on Form 1099-DIV, which details your mutual fund distributions.
Mutual funds sometimes pay foreign taxes on their overseas investments. Since your mutual fund is a pass-through entity, everything must get passed on to you, so your share of those paid taxes would be reported in Box 6 on your 1099-DIV.
But then you need to report those taxes paid as a credit on line 47 of your tax return. You already paid some tax on those distributions, so there's no need to pay twice.
• Tally your investment and tax expenses. Any attorney or accountant fee that pertains to your tax situation is deductible as a miscellaneous itemized deductions. Granted, those deductions are limited to 2 percent of your adjusted gross income so that means only the deductions that exceed 2 percent of your AGI are deductible on Schedule A. But start tallying, because every little bit helps.
• If you have a safety deposit box for your investments, you may be able to deduct the cost of the box as a miscellaneous itemized deduction. Include any cell phone calls that pertain to your investments. And if you got divorced in 2006, the legal time spent discussing the tax aspects of alimony and child support would also qualify.
• Any job-related expenses that are not reimbursed by your employer are also considered miscellaneous itemized deductions, so add them up too. Include items like uniforms, newspapers and publications that you read for work, education courses that improve your skills, work calls on your personal cell phone, and passport fees for business travel.
Same goes for any job-hunting expenses, like resume preparation and career counseling. Big note: Expenses incurred while looking for your first job are not deductible.
• If you switched jobs during 2006, you might've had too much Social Security tax withheld from your paychecks. The 2006 cap was $5,840. When you start with a new company, human resources has no idea how much Social Security tax was withheld from your previous job and may start the withholding as if you were at zero. So be sure to check your W-2s. If you had more than $5,840 withheld, you can claim a credit for the overpaid amount on line 67 of your federal Form 1040.
• Don’t forget the child-care credit. Child-care expenses of up to $6,000 can qualify.
Tracy Byrnes is a New York Post business writer and a regular guest on The Cost of Freedom.
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Tracy Byrnes joined FOX Business Network (FBN) in October 2007 as a reporter.