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How To Maximize Your Tax Deductions

Feb 19, 2008
It's tax season AGAIN, and you should be looking for those tax deductions that can legally lower you tax bill.

Here are some of the typical deductions that you want to make sure your tax preparer knows about so you get the write-off.

2007 Mileage Deductions

Business Mileage 48.5-cents per mile
Charitable Work Mileage 14-cents per mile
Medical & Moving Mileage 20-cents per mile

Dependent Education Expenses

There are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. They are the Hope Credit and the Lifetime Learning Credit, also referred to as education credits.

To learn about these credits, who can claim them, what expenses qualify, and more, visit the website www.irs.gov and in the search bar type in either "child education expenses" or "Publication 970."

For dependents in daycare through middle school, deductible expenses do not include tuition. However, after-school care expenses and a few other types of expenses are deductible. Ask your tax preparer for advice and be prepared to supply the name, address and federal tax ID number or social security number of the care provider as this information is needed on the tax return.

For each dependent, your tax preparer will need the child's full name, date of birth and social security number.

Schedule A Itemized Deductions

If your itemized deductions exceed your standard deduction, then you are allowed to take the greater of the two. Here are the standard deductions for 2007.

$5,350 - Single or Married filing Separately
$10,700 - Married filing jointly or qualified widow(er)
$7,850 - Head of Household

Here is a partial list of Schedule A deductions - for details visit the website www.irs.gov and in the search bar type in "schedule A" and look at the instruction form:

1. Mileage (not claimed as business mileage on another form)
2. Medical expenses
3. Charitable Contributions (there are new record keeping rules that apply for cash donations)
4. Mortgage Insurance premiums for contracts issued after December 31, 2006 (this is NEW for 2007!)
5. Mortgage Interest & Points
6. Real Estate Property Taxes (on residences not used for business or rental)
7. Sales tax you paid on retail purchases
8. Investment interest on money borrowed for a property held for investment
9. Job expenses you paid as an employee (if you were not reimbursed and if you are not filing Form 2106)
10. Tax preparation fees paid to a professional tax preparer

Schedule E Deductions for Rental Properties

If you own rental properties then the income and deductions go on Schedule E. Here are the deductions you can take on rental properties.

Here is a partial list of Schedule E deductions you can take on rental properties - for details visit the website www.irs.gov and in the search bar type in "schedule E."

1. Advertising
2. Auto & Travel
3. Cleaning & Maintenance
4. Commissions
5. Legal & Other Professional Fees
6. Management Fees
7. Mortgage Interest
8. Other Interest
9. Repairs
10. Supplies
11. Property Taxes
12. Utilities

While we must pay some taxes, it's smart to use a professional tax preparer and be sure you are getting the maximum allowable deductions to reduce your tax bill. There are other deductions available if you have them, but these are the most common.
About the Author
Sandra Simmons, President of Money Management Solutions has years of experience helping business owners and individuals manage their money to achieve financial freedom. Watch the FREE 5-minute demo video on her website www.MoneyMgmtSolutions.com
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