Year-end moves help ease tax burden

A few new tax breaks are worth checking out this year.
By EILEEN AMBROSE
BALTIMORE SUN
It's that time again to look for year-end moves to trim your upcoming tax bill.
Of course, there are the evergreens: Sock away money in tax-friendly 401(k)s or individual retirement accounts. Sell off loser stocks to offset capital gains on winners. Bundle medical expenses so they're large enough to deduct. And don't forget to use up cash remaining in a flexible spending account.
These tactics are still worthwhile. But a few new tax breaks are worth looking at this year, and some recent tax revisions might change your investment strategy or the way you make donations. And one new refund option is aimed to encourage savings.
The Treasury Department this year finally abolished a tax on long-distance calls that had been imposed to finance the Spanish-American War of 1898. A one-time refund will be given to those who paid the tax on phone bills after Feb. 28, 2003, and before August of this year.
Millions will be eligible. A line to claim the federal telephone credit will appear on returns (it will be Line 71 on the 1040). Even those whose income is low enough that they don't need to file a return will be able to claim the refund by filling out a new form, the 1040EZ-T, said Barbara Weltman, author of "J.K. Lasser's 1001 Deductions and Tax Breaks 2007."
You can figure your refund based on how much you actually paid, if you have old phone bills, Weltman said. Or, you can opt for the standard refund. That amounts to 30 for an individual, 40 for two-person household, 50 for three and 60 for families of four or more.
Energy credits
This is the first year for credits designed to encourage people to make their home more energy efficient, said Mark Luscombe, principal tax analyst with CCH Inc. in Illinois. (A credit reduces your bottom-line tax bill dollar-for-dollar. That makes it better than a deduction.)
You can get a maximum credit of 500 over two years for adopting certain energy-saving measures. The credit will cover part of the cost of adding insulation or installing exterior windows and doors. (No more than 200 can be claimed for windows.)
Also, the credit can be applied within limits to furnaces, heat pumps, hot water boilers and advanced main air-circulating fans. "All these have to meet energy-efficient standards," Luscombe said.
Those going solar by installing solar panels or solar water heaters might receive an annual credit worth up to 2,000.
But don't procrastinate. Energy credits are only good for this year and next.
Buyers of fuel-efficient hybrid vehicles are entitled to a credit worth a few hundred dollars to more than 3,000, depending on the vehicle.
If you've been considering a hybrid, buy now rather than next year, said Theresa Bandell, manager of Stegman & amp; Co., a Maryland accounting firm. That's because the credit only applies to the first 60,000 hybrids sold by each manufacturer and then starts phasing out, she said.
This is already happening with some popular models. For example, consumers who bought a Toyota Prius before the end of September will receive a 3,150 credit. But Toyota hit its 60,000 limit, so the credit as of October has been cut to 1,575. The Prius credit will drop again in April and disappear in October.