IRS Releases Instructions for Claiming Extended Tax Deductions

The Internal Revenue Service issued instructions for how taxpayers can claim various tax breaks that were extended under the Tax Relief and Health Care Act of 2006. Taxpayers claiming the tuition deduction, classroom expenses deduction, or state and local sales tax deduction will need to follow these steps very carefully. IRS Commissioner Mark Everson urged taxpayers to file their tax returns electronically instead of mailing in a paper tax return. "E-file will greatly reduce the chances for making an error," the Commissioner said.

Here's how to claim these extended tax deductions.

Tuition and Fees Deduction

Claim up to $4,000 in tuition and fees paid to a college or other post-secondary educational institution on Form 1040, Line 35, and write a "T" on the dotted line. This line is also used to claim the domestic production activities deduction. If you are claiming both deductions, write a "B" on the dotted line, and attach a statement that details the amounts claimed for each deduction.

Classroom Expenses Deduction

Claim up to $250 if you are a teacher or principal and you have out-of-pocket classroom expenses. Use Form 1040, Line 23,, and write "E" on the dotted line. This line is also used to claim a deduction for Archer Medical Savings Accounts. If you are claiming both deductions, write "B" on the dotted line, and attach a statement that details the amounts claimed for each deduction.

State and Local Sales Tax as an itemized deduction

You can deduct either state and local income taxes paid, or sales taxes paid, on Schedule A, Line 5. To claim the sales tax deduction, write "ST" on the dotted line. The IRS has also posted Publication 600 containing the sales tax tables and worksheet.

IRS Resources:

• IRS Begins Implementing Extenders Legislation; Works to Help Taxpayers During Filing Season (IR-2006-195)
• Form 1040 for 2006 (PDF)
• Schedule A for itemized deductions (PDF)
• Publication 600 Sales Tax Tables (PDF)

Related Tax News:

• Extender entry instructions (Don't Mess With Taxes)
• President Bush Signs Tax Bill (Tax Prof Blog)