Ever put back that second bottle of rum on vacation that you thought about bringing home, or leave behind that designer watch that you had your eye on, because you didn't want to pay duty at customs? Or not sure what you even have to pay duty on in the first place? Here’s what you need to know.

For starters...
"Duty" is simply tax on items purchased internationally. Regardless of whether you've paid sales and other taxes on purchases overseas, you may still have to pay U.S. duties at customs -- so it's always a good idea to keep all receipts, to prove how much you paid for those items (and how much duty you need to fork over subsequently).

You can combine exemptions.
If you've spent at least 48 hours abroad, you can bring back up to $800 worth of merchandise for your personal use or for gifts (alcohol and tobacco have separate regulations). Family members that live in the same household, including minor children, get the same exemption. In other words, if you travel with your spouse and two children, you have a combined exemption of $3,200.

For real-life application, let’s say you want to purchase a $1,200 designer watch. If you were traveling alone, you would exceed your $800 exemption by $400 and have to pay duty on that overage. But traveling with your family means that you can “borrow” a family member's unused exemption, and you'd thus avoid having to pay more.

In the event that you do go over your exemptions, you’ll pay 3 percent on the next $1,000 of purchases and 25 percent after that. In the same aforementioned scenario, if you were traveling alone, you’d wind up shelling out $12 of duty for the $400 overage.

You can bring back more than one liter of alcohol.
Customs regulations state that you can bring back one American liter (33.8 fluid ounces) duty-free if you are at least 21 years old. Want to bring more? You’ll have to pay duty on the additional bottles... but we've heard stories of customs agents looking the other way to avoid hassle for a small duty. After all, on a second $25 bottle of rum, the 3 percent duty comes out to all of 75 cents. That said, you still don't want to give agents reason to suspect that you're importing the liquor for resale, in which case it'll most likely be confiscated. And, again, you can “borrow” any unused exemption from family members, as long as they're over 21.

Similar rules apply to tobacco products. In general, you can bring back one carton of cigarettes duty-free. But if you want to bring back more, make sure they're a foreign brand, or agents can confiscate them.

Duty-free isn't as simple as it seems.
Think you can avoid paying all duty by making your purchases at the duty-free shop in the airport? Not exactly. Items from these stores exclude import and perhaps sales taxes of the country that you're purchasing them in -- but you're still subject to customs when you return home. So if you purchase two bottles of Johnny Walker in a duty-free shop, you'll still have to pay 3 percent of that second whiskey. This means you can score some great deals at the airport. Just be clear on what you'll have to declare and pay duties on and, as always, compare retail prices outside of the airport whenever you can.

One last thing…
Taking something you purchased Stateside on an international trip? If you can’t prove you didn't make the purchase overseas on the way back home, you could be subject to pay duty on it also. To avoid owing duty on a new digital camera or laptop, for example, carry the receipt with you -- or register your item before you go by completing a Certificate of Registration for Personal Effects Taken Abroad (CBP form 4457).