Column: Tax Breaks Return in Force

WASHINGTON -- Telephone users, energy-savvy homeowners and parents of older teens should pay special attention at tax time this year. Many changes affecting 2006 tax returns are aimed squarely at you.

On balance, the news is good.

Even if you don't have to file a tax return you can get a refund on certain telephone taxes.

And late last year, Congress reinstated several popular tax breaks for the middle class, including a deduction of up to $4,000 for higher education tuition and fees. The provision, which expired at the end of 2005, was designed to help taxpayers whose incomes put them beyond the reach of two education tax credits that primarily help moderate- and lower-income families.

Lawmakers also reinstated a deduction for state and local sales taxes that primarily benefits people living in states without an income tax. Also restored was a deduction of up to $250 for teachers' expenses.

Congress also took something away from family pocketbooks last year _ raising the age at which teens are subject to the "kiddie" tax, the tax on the child's investment income that must be figured at the parent's top rate instead of the child's generally lower rate.

Before, only those under 14 were subject to the higher tax; now, those under 18 are included. That change may ensnare earnings on certain college funds or savings vehicles started before taxpayer-friendly 529 college plans became widely available.

And there's a bit of bad news for packrats. Taking a tax deduction for donating the deteriorating junk in your attic to charity is harder. Household goods and clothing donated after Aug. 17, 2006, must be in "good used condition or better" to qualify for the deduction, available to taxpayers who itemize.

But if you improved your home's energy conservation, you may be able to take a residential energy credit. A credit is a dollar-for-dollar reduction in tax liability, whereas a deduction only reduces the income against which tax is assessed.

Homeowners who purchased insulation, certain energy-efficient windows, hot water boilers, furnaces, air conditioners or similar equipment in 2006 can claim the residential energy credit. Taxpayers can take a credit for 10 percent of the cost, though there's a maximum, and specific limits apply to certain equipment.

People who purchased hybrid or other alternative-fuel vehicles can also take a credit, though it's reduced if the manufacturer has sold 60,000 or more such vehicles. A list of vehicles and their credits is on the Internal Revenue Service Web site at http://www.irs.gov.

Most taxpayers can claim a one-time refund on federal excise taxes for long-distance telephone service _ whether for landline, cell phone or Voice over Internet Protocol. The government stopped collecting the 3 percent tax after July 2006 after businesses repeatedly fought the tax and won.