Tax 2004: Boost Refund

An example: You put $5,000 in an account a few years back and have reinvested a total of $1,000 in dividends during the years since. A sale of all your shares for $8,000 results in a profit of $2,000 ($8,000 minus $6,000), not $3,000 ($8,000 minus $5,000).

Don't overpay your Social Security tax. If you had more than one job in 2003 and your total wages topped $87,000, add up the Social Security withholding on your W-2 forms. If that total exceeds the 2003 maximum of $5,394 (6.2 percent of wages up to $87,000), you can claim the additional amount as an overpayment on line 64 of Form 1040.

Be aware that some kinds of income escape taxes. You are not liable for income taxes on, say, compensation for a personal injury, such as whiplash suffered in an auto accident or a settlement received from a late relative's life-insurance policy. Child support from an ex-spouse is not taxable either, whereas alimony can be.

Remember that every dollar that you pay in state and local taxes is deductible for the year in which payment takes place, provided you itemize on your 1040 form.

For 2003, the allowable deduction on line 5 of Schedule A includes more than what was withheld from 2003's paychecks. It also includes an overpayment of 2002 state taxes that you elect to apply to your 2003 state tax bill (easy to overlook if you total up your state tax payments by looking only at your W-2 and your checkbook) or a check that you wrote in 2003 to cover a shortfall on your 2002 state taxes.