Tax Deductions and Ways to Lower Your Tax and Increase Your Tax Return

Tax season pressures might tempt some people to over look deductions that are available to them. Rather then exploring the tax deductions and credits such as income tax deduction and self employed tax deductions that are available to them, people unknowingly overpaid Uncle Sam.

Deductions help lower your taxable income and credit lowers the tax by reducing your taxable money.

Below are some tax deductions and credits that can help you lower your tax bills and get more money back:

State and Local Sales Taxes
Income taxes you pay to the state, to your county, or city are tax deductible. Add the state and city taxes shown on the W-2s and compare the total to the standard deduction.

You can also add the estimated tax payments that made to your state or local government including any 2006 refund you had allied to your 2007 tax bill.

Deduction for Teachers and other Educators
If you are a teacher or a teachers’ aide, you can deduct up to $250 you spend for books and any classroom supplies. Put your deduction on line 23 of Form 1040.

Charitable Donations
Money and out of pocket cost you donated qualify as Federal tax deductions. Out of Pocket costs such as ingredients you brought to make that delicious soup for the nonprofit organization’s soup kitchen or the envelopes and stamps you brought for the school’s fundraiser also counts as charitable contribution.

If you donated a car, clothing or any other items, you need to determine their values. One way to do that is to go to local thrift shop, used car dealership or the internet to see what they are charging for similar items

IRS requires you to show a receipt of the item you donated if the item is over $250. So, make sure you get one.

Medical Expenses
Medical expenses are one of the tricky deductions. Only a very few taxpayers get to deduct them because it is based on your adjusted gross income (AGI). Let a tax software such as Turbo Tax help you figure out whether you can use medical expenses as a tax deduction or ask a tax professional.

College Tuition
If you are still going to college then college tuition can help you deduct the amount of money you are paying to go school. You may qualify to deduct up to $4,000 you paid for tuition in 2007 for yourself, spouse or a dependent. This deduction can be useful if your income is too high to qualify for the Hope or Lifetime Learning credit.


Looking for a Job Expense
You can deduct certain expense incurred while looking for a new job within your current occupation, even if you do not get a new job. This means if you are looking for a new job for the first time or in a new occupation then you are not qualify for this deduction. You can deduct the following relating to your search for a new job:

• Amount spend on typing, printing, stamps, and mailing your resume to prospective employers.
• Travel expenses to and from an area looking for a job related to your occupation. Even if you cannot deduct the travel expenses, you can deduct the expenses of looking for a new job in the present occupation while in the area.
• Local and long distance phone to your prospective employers are also deductible. Faxing fees are also deductible as well.

You should obtain more information from the IRS in regard to the looking for a new job expense. You can go to IRS Publication 529 and the Internal Revenue Service for more information.

Moving Expense to Your New Job
So you got a new job that pays you more then your previous one but the only draw back is you have to move more then 50 miles. The good news is that moving more then 50 miles qualifies you for a moving expense deduction that includes getting yourself and your household goods to the new area. Parking fees and tolls are also part of the deduction as well.

Early Withdrawal Penalty Deduction
You can deduct the penalty incurred from your early withdrawal of your certificate of deposit (CD) from your bank. You deduct it on Form 1040.

Reinvested Dividends
This is one of the benefits that many taxpayers miss. This is not a deduction but you can subtract the reinvested dividend you receive from mutual funds from your total taxable income. Doing this can prevent you from overpaying your taxes.

Home Mortgage Interest Tax Deduction
Owning a house is fantastic but paying the monthly mortgage fees is not so fantastic. However, your mortgage interest is tax deductible. You can report this on Form 1040, Schedule A along with other itemized deductions.

Self Employment Tax Deduction
So you have taken the challenge and became your own boss by being self-employed. Your own business is doing great and you now have self-employment income. By having this self-employment income, you can take a deduction for half of your Self-Employment Tax. You can do this on Form 1040.

Self Employment Health Insurance Deduction
Having your own business also requires you to take care of yourself. One way to take care of yourself is to have health insurance. To qualify, you must not be eligible to participate in a group health plan and you must be self employed. If you qualify you can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents.

Being self employed does have its advantage when it comes to tax time.

These are just some of the deductions and credits available to you. I strongly recommend you to do some more research to see what other deductions and credits you might qualify for. For more information, refer to IRS Publication 501, Exemptions, Standard Deduction, and Filing Information and IRS Publication 529 (2007) Miscellaneous Deductions and the Internal Revenue Service website.

You can also go online and do a search to see what other deductions are available. This way you can get the full maximum deductions.

Also, tax software such as TurboTax are a great tool to use to file your tax because it has a built-in tax deduction maximizer that can maximize your deductions and lower the amount of tax you have to pay and give you more cash back. This way you can get fat money.

The link below might be of interest to you:
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