Tax Deductions:

Every April millions of Americans dred having to submit their taxes to the IRS. The process of filing your taxes has become more complicated over the last few years with the AMT (Alternative Minimum Tax) coming into play for millions each year. The real question is how to limit the amount of taxes you pay to both the federal and state governments in income tax. Legally, you have plenty of tax deductions at your disposal, but not all deductions are worth it. In recent years I have had my accountant do my personal income taxes and often the price of a CPA to file certain forms outweighs what the deduction will save you in taxes. Make sure you talk over any tax deductions with your accountant or CPA so that taking the deduction makes financial sense. Many people try to come up with receipts at the last minute and are not organized, therefore leading to a real hassle come tax time.

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The best tax deductions you can take are for things like mortgage interest, property taxes, mortgage points, car donations, child care, and medical expenses. Small business owners who are self employed can often deduct their personal health care premiums from their tax bill and if you have an HSA (Health Savings Account) that's a great deduction as well. If you are willing to take a chance, those that work at home can take a home office tax deduction by writing off a percentage (%) of your heating bill, electricity, or rent. The IRS has started to crack down on those that take advantage of the home office deduction so you better have proof if you go this route. When both parents are working, you can use the child care tax deduction if your child goes to preschool. If you need your car for work purposes, then you can get an automobile tax deduction and many people lease cars if they are real estate agents or work as traveling salespeople. You can also get the mileage deduction which as been raised in recent years due gas prices climbing. Check with the IRS.gov for the current mileage rate tax deduction for the current tax year. 529 education plans are deductible in many states, so definitely look into that option for your kids education fund. The best thing to do when organizing your taxes is to download or print out a tax deduction checklist so you don't forget anything. You can find a good selection HERE. Although IRS audits have increased over the past few years, it's still not very likely in any given year that the IRS will audit you. Cheating on your taxes is something that many of us have done at one time or another, but eventually that practice will catch up to you.

Vehicle Tax Deductions:

There are lots of ways for you to save on your tax burden by buying or donating cars or boats. Some hybrid cars will get you tax credit come tax time but the IRS is slowly phasing out some of these deductions as more of the "green" cars are sold. Donating a car to reduce your tax payment is another excellent tax deduction you can take. It's up to you to determine a "fair market value" to the vehicle, but if the value is above $5000 you will need an appraisal. This type of vehicle donation works not only for cars, but also for motorcycles and boats. Not all car donations are tax deductible and some organizations that you donate the car too can have misleading claims so be sure to look into them.

Small Business Tax Deductions:

Most tax experts will warn small business owners not to get too frisky with tax deductions since the IRS audits small businesses most. There are plenty of legitimate tax deductions your small business can take that should not draw any attention from the IRS. Perhaps one of the most controversial deductions you could take is the "home office" tax deduction where you essentially say a portion of your house is used solely for your business purposes (den, extra bedroom, office). You can then claim a percentage of your rent, mortgage, insurance, electricity, etc. Other popular small business deductions include office supplies (paper, pens, computers, printers), furniture, software or subscriptions, mileage, travel (entertainment & meals), insurance premiums, retirement contributions, social security, telephone charges (landlines and cellphones), and child labor. I have run a small business for the last decade and unless you know all the current tax codes, get a certified CPA to help you maximize your tax deductions and minimize your chances of being audited by the IRS.

Real Estate Deductions:

The biggest tax deductions tend to come from your real estate holdings, especially if you have a mortgage on your home/condo. Mortgage interest tax deductions can be worth $1000's each year and any property taxes are also fully deductible on your tax return. If you carry a $2000 mortgage on your house you could potentially be writing off close to $20000 in interest paid on your mortgage each year. That's a huge tax benefit come year end and throw in $5000-$10000 in property tax and your tax bill could really be decreased. When you get a new mortgage or refinance, any "mortgage points" you pay are deductible as well. If you have a home equity loan, the interest you pay should be tax deductible as well. Any CPA will tell you that buying a home is a good investment over the long haul since much of the monthly costs are tax deductible and the appreciation tax free up to $250,000 ($500,000 for couples).

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