Charitable Contributions
The total charitable contributions you have given throughout the year are totaled and entered on Schedule A (Itemized Deductions). You can include both cash and non-cash donations. But note for all cash and non-cash donations, you must retain the receipt you received from the charity, in order to prove your deduction. As for non-cash donations, you also need to be aware that if the value of your non-cash contributions exceeds $500, you will have to fill out Form 8283 which asks for specific details of the donation.
Income Taxes
The IRS allows taxpayers to deduct, again on Schedule A, the total amount of state income taxes withheld and/or paid directly (as in estimates) to the state. This could amount to some big dollars. This also includes amounts you had to pay with your prior-year state tax return if you owed money. So for example, let's say when you filed your 2006 state tax return in April of 2007, you owed $850. You would be able to include that amount as part of the state income tax expense you are claiming as a deduction on Schedule A. Note, though, that interest and penalties on any underpayment from last year are NOT includible as a deduction.
Real Estate Taxes
The IRS allows you to deduct real estate taxes on property you own, including vacation property. Ask your mortgage servicer if they would consider paying your January property tax payment that they have been escrowing for all year, by December 31st. If your property tax bill amounts to $2,000 and you are in the 25% tax bracket, you could have just saved $500! That's worth a phone call.
Personal Property Taxes
You are also allowed to deduct personal property taxes paid on property you own. For example, property tax you paid to the town for your cars, motorcycles, motor home, etc. This could add up.
When you're ready to prepare and file your federal income tax return, sit down with your checkbook and any receipts you may have received, and carefully look to see what deductions you can take advantage of. You don't want to overlook anything that is going to save you money!
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