1.    Loss on Investment Deductions

If you incurred any losses from your investment products like mutual funds, bonds, stocks, etc. you ca deduct that amount from your taxable income. You must contact your broker and ask for an electronic statement, which might be useful to prove your loss.

2.    Charity Donations

If you made any donations to a recognized charitable organization, it’s deductibles. You don’t necessarily have to give cash, you can give away furniture, clothes, and any other item in good condition as charity, and they are all deductible.

3.    Property Deductions

Taxes you pay on your property are also deductible. You will, however, need a tax bill. People on mortgage must ask for a 1098 from the loan provider. If you are amongst the ones applied for first time home buyer tax credit, you will nave to attach IRS Form 5405.

4.    Interest on Students Loan can be deducted

5.    Family Expenses

If you have a family, you enjoy certain tax benefits. Expenses for adoption, dependent care, earned income credits, child tax credits, are all tax benefits you can claim.

6.    Vehicle Expenses

If you have a eco-friendly or hybrid vehicle which are qualified by IRS, you have to pay lesser income tax.

7.    Dental and Medical Expenditures

If your dental and medical expenses exceed 7.5 of your Adjusted Gross Income (AGI), you can deduct the amount from your total income tax payable. All costs pertaining to medical like insurance premiums, medicines bought, prescription bills, medical bills, visiting charges, equipments bought for treatment, traveling expenses, etc. are deductible.

8.    Retirement Investment

Investing in retirement accounts like traditional IRA are deductible. Some people also enjoy retirement savings contribution credit.

9.    Employment Expenditure

If you are spending money from your pocket to meet the work related expenses like travel, clothes, gas mileage, bills, accommodation, and so on, it is deductible. If you are self employed, you enjoy many other benefits especially if you are working from home.

You can benefit from most or all of them, only if you are aware about them and know how to use it. So, read more about these list of tax deductions, ask your consultant, and make a smart decision before filing your taxes.

You can, as a tax payer, include expenses that are paid for your family or any other dependents, for deductions. The common ones are:

• Payments made on premiums for long term care insurance, dental, and all other medical insurances.
• Deductibles on insurance including co-payments
• Any visiting charges paid to dentists, psychiatrists, doctors, health practitioners, and chiropractors
• Payments made to long term care facilities, hospitals, lab fees, nursing homes, and so on.
• Expenses paid to cover cost of medicines, insulin, and other drugs.
• Expenses paid to purchase hearing aids, eyeglasses, contacts or false teeth.

These were, however, some of the very common medical expenses tax deductions. Apart from these, there are few others that aren’t known to all tax payers.

• Any expenses paid to have acupuncture healing
• Any expenses paid to cure drug or alcohol treatment, or any related visiting charges
• Any expenses to enroll in smoke-cessation plans
• Any expenses to participate in programs such as weight loss, or to diagnose obesity and hypertension
• Expenses paid for treatments like laser eye surgery, of for crutches, guides for old and blinds, or for wheelchairs
• Traveling costs related any of the above treatments or services

I guess pretty much every medical expense is deductible. Are there any things that are not deductible? Yes, there are few expenses that cannot be considered as deductible.

• Diet food, and health club fees
• Funeral related expenses
• Expenses paid for cosmetic surgeries
• Expenses paid to purchase nicotine gums and patches, which are available without any prescription

Now that you know which medical expenses are deductible, how do you claim them?

To claim medical expenses tax deductions that aren’t reimbursed by any insurance companies or any other organizations, you will first have to calculate the total deductible amount, and accumulate all the receipts and bills, which will be required as proof. Now these costs should be mentioned in Form 1040, Schedule A, and it should exceed 7.5% of one’s AGI (Adjusted Gross Income). That’s it.

Office Space

As a freelancer, if you are using your home space for business, you are entitled to waive off your office space. The amount, otherwise, paid as rent or mortgage can be deducted from your taxable income. Thus, working a s a freelancer can earn you more than a regular employee. Also, a part of your renters or homeowners insurance is can also be deducted as non-taxable income.

Bills

Working from home means using personal telephone lines, internet, and other utilities. These expenses, however, can be deducted up to the amount used for commercial purposes. If you have a dedicated phone line or fax for your business, it can be completely written off.

Technology

Every business, these days, is run with the help of technology. If you purchase any technological equipments to start or enhance your business, it can be written off completely. These technology purchases include computer up-gradation, routers, printers, fax machines, pen drives, web cams, new computer, etc. Also, any software bought for your business is deductible.

Stationary

Expenses made on purchase of office supplies like pen, paper, files, chairs, desks, or, any other supplies that help you to conduct your business can be written off. Postage costs, envelopes and other external stationary costs related to your business can also be deducted.

Business Overheads

This category includes all other costs like incorporation fees, business cards, letter heads, etc.

Educational Fees

Any cost incurred to enhance your commercial skills can also be deducted. You can include training fees, seminar costs, subscription costs, varied courses, and any other fees that will help you make a better entrepreneur, under this category.

Online Fees

If you are a freelancer, it’s very likely you might have a website. The costs incurred to register the domain, website designing charges, and other maintenance costs are also deductible.

Travel Expenses

Along with traveling charges, you are also eligible to deduct numerous other expenses like parking fees, bus and train tickets, hotel room cost, food, office space rent, and also your laundry costs. Not all expenses, however, would be 100% deductible. Hence, it’s wise to consult a tax professional before filing these expenses.

Miscellaneous Costs

You can include every other type of cost in this category. You can write off your health insurance premium cost if you have paid it through your business; credit card bill if paid as business expenses; unpaid client bills, etc. It also includes tax consultation fees and tax software costs. Lastly, you are eligible to write off client related expenses like gifts or luncheons given.

Hence, it becomes quite important for a home based business owner to keep track of all the expenses made throughout the year. Also, consult a tax professional before filing your tax this year, to avoid any glitches.

Because IRS Wants You To

You might not do it if I tell you to, but you have to listen to IRS which wants about 80% filing of tax returns electronically by 2014. The reason is simple- Electronic filing makes it easy for it to work upon your data. Yes, like many other computerized systems, an electronic tax filing system is going to yield more accurate results in shorter time.

E Filing Is Easier, Faster and More Interactive

Paper documentation can be so boring especially when you have to fill in lengthy details. For e-filing you just need to buy the software and make your record yourself. There’s no need for you to visit the tax offices to collect the paper forms. You can also fill up the details from the comforts of your home by visiting the e-filing websites. The software does a lot of calculations for you. You are simply asked a set of questions which you need to answer. Even if there’s a fee, normally it’s very less.

Accurate Results

The information recording in the e-filing is generally more accurate than the one fed by manual process. Computer input and processing of information eliminates human error and hence is expected to record and yield the most reliable information. Moreover, computer processing saves both the tax payer and the tax officials a lot of time.

Faster Refunds

Faster processing is going to get you your refunds faster. A computer system is going to work faster than humans and hence is going to get you your refunds soon. You might get your returns as early as within 10 days of your e-filing of tax returns. The electronic system can also be programmed to directly deposit the refunds in your account.

More Security

The conventional mailing system might result in loss of your mail containing your tax returns statement, whereas this does not happen when you transfer electronically. The privacy of your information also remains intact as it is given by the IRS for electronic filing system.

Convenience

With the electronic filing system of tax returns you don’t have to stand in long lines waiting to submit your tax returns. You will get the notification of your submissions within two days of the submission of your electronic forms. The conventional method takes much longer than the electronic method.

These reasons make it all the more important for you to go for an e-filing system rather than the normal conventional method.

Make Contributions to Your 401(K)

There’s still time to make contributions to your 401(k) for this year. The traditional IRA contribution deadline is the 15th of April, 2010 for the 2009 year. The maximum you could contribute is $16,500 for both this and the coming year. If you are over 50 the limit is $22,000. Consult your employer to see if you could still make contributions for your 401k.

Wait Till Next Year to Make Roth IRA Conversions

If your modified gross income is less than $100,000 you can convert it to a Roth IRA. From next year, this $100,000 limit will be lifted so that anybody can avail the Roth IRA conversion. The revenue from the conversion can be distributed over the next couple of years after 2010. This offer is feasible only for 2010. So just wait, and like so many others, take full advantage of this.

Sell Off Non-Profitable Investments

The S&P Index 500 was pretty shaky this year. In March it touched an all-time low of 666 and later bounced back to a high of 1,119. Under uncertain market conditions it is always advisable to sell off the investments that are not brining you any profits. The very first thing that you should do is to sum up your total profits and then subtract your losses from that. If the losses are more than $3000 you can carry over the losses to the future years.

Sell Long Term Investments

Selling long term investments in both this year and the next, will exempt you from paying taxes on the resulting capital gains. For your investment to be considered a long term one, you must have made profit from a security like a stock or an investment fund. You must have held the security for over a year, for the investment to be considered a long term one.

Donate, If Not for Charity, For Tax Deductions

Making donations will get you tax deductions in the same year as the donations are made. This is the holiday season and Christmas is round the corner. Hunt for some precious little items in your house which can be of use to those poorer than you and donate. You can also make cash donations and take the receipt from 501(c)(3).

Pay Up your January Mortgage in December

Paying up your January mortgage in December will earn you a deduction in tax on mortgage interest payment. You’ll get the advantage of paying up the mortgage for one whole month in advance.

Pay Up Medical Bills

If your medical expenditure amounts to more than 7.5 % of your adjusted gross income, you get a tax deductible on payment of your bills.

Use Tax software

Visit a personal finance website such as Mint.com to know completely what you could to avail tax deductions to the maximum. Online tax software, such as Turbo Tax, is of great help for making tax related calculations. Tax Caster is a software from Turbo Tax which will help you in finding out the tax overhead on you and find out ways in which deductibles can be applied even in the last moment.

If you are not already aware, the tax losses on the rented property are categorized under the PALs or passive activity losses. These tax losses are deductible only on your passive income which includes the rents that you collect on any other rental properties of yours. The PALs get invoked even if you sell off the rental properties. But if you are not selling any property at present or don’t have any other rental property from which you are actually making money, you cannot expect your PALs to be effective. You have to wait for that because they remain dormant till the conditions for activity are fulfilled. The PALs will be activated only when you sell the property and that might take a long time. So, there will still be some before you can actually minimize the tax losses on your rental properties.

But then, though the above mentioned condition is the general rule, there are a couple of exceptions that you can leverage to your advantage.

The first rule applies to active property owners. If your modified adjusted gross income (MAGI) does not exceed $100,000, you can expect to deduct tax losses upto $ 25,000 on the rental properties. This is regardless of your marital status. For availing this exemption, you should be an active participant of the rental activities. You should hold a 10 % stake and also should take part in activities like selecting tenants, signing the rental contracts, granting permission for repairs etc. In essence you have to be involved actively in the management of the estate. But you cannot avail this tax loss deduction in the proper limits, if you hire a management firm to take care of all the management activities of the property.

If the MAGI exceeds $100,000 but is within $150,000 you can expect you still avail the tax deductibles but they are phased across in periods. So if your MAGI is $125,000 you can deduct upto $12,500 which is half of $25,000. But if your MAGI is $150,000 or above, you no longer are eligible for this tax exemption program. You fall under the generic anti-tax category of the PAL.

The other exception applies to real estate professionals who have spent 750 hours an year on real estate work. They can claim deductibles on their PALs. You should be the person spending more time on your property than anyone else for availing the tax benefits. You should spend at least 500 hours on your own property. For qualifying for tax deductibles you qualify in material participation test. If you are renting out your property in a resort area, your tax losses are not considered pals.