14 Overlooked Ways to Slash Your Taxes

A New Deduction:
If You Don't Itemize ...

If you don't itemize deductions on your income tax return, you'll want to pay attention to this one: It's brand new for 2008! Until now, if you wanted to deduct your home's property taxes from your income, you had to itemize (using Schedule A) to do it. As a result, if you didn't itemize, you couldn't take the deduction. There's a new law that lets you increase your standard deduction by the amount of real property tax you could have claimed if you did itemize -- up to $500 ($1,000 on a joint return).
Next: If You're a Homeowner ...

Special Tax Deduction for Refinancers

If you refinanced your home last year, you can deduct your "old' unamortized points from your previous (now paid off) loan. Just how does this work? Suppose you bought a house in August 2007 and you secured a 30-year loan for $300,000 that cost 2 points (2% of the loan amount). That's $6,000 in points for that year. Then in August of 2008 -- one year later -- you refinanced and paid new points for the new loan. Your old loan only amortized 1/30th of those points, or $200, so you now have unamortized points from the original 2007 loan in the amount of $5,800.
Next: If You're an Investor ...

Take Your Losses:
If You're an Investor ,,,

If you sold any stocks at a loss in 2008 (and with the market down over 33% in 2008, who didn't?) the good news is that you'll get a deduction for it. You have to use the loss to first offset any capital gains that you might have enjoyed, but after that you can take a deduction against your ordinary income in future years -- up to $3,000 per year. We know, it's not as good as actually making money in the market, but at least it'll help soften the blow.
Next: If You're a Working Parent ...

If You're a Working Parent ...

This one is a tax CREDIT, not a deduction. (A tax credit actually reduces your tax bill dollar for dollar.) If you pay for childcare, including daycare or nanny services, you can reduce your taxes up to $3K for a single child or up to $6K for two or more children under the age of 13. The amount of the credit ranges from 20 to 35% of your child care costs, depending on your gross income. For example, if your income is $43K or more, you can claim a 20% credit on your childcare costs. So if you have one child and you spend $8K a year in childcare costs, you can save 20% off the first $3K -- or $600. As always, certain "rules" apply.
Next: If You're Going Green ...

If You're Going Green ...

If you made an effort to go "green" in 2008, Uncle Sam wants to put a few extra dollars in your pocket. Unlike deductions against your income, these are actual tax credits ... so again every penny ends up in your pocket. Probably the biggest tax credit -- between $200 and $3,500 -- comes from purchasing a new hybrid vehicle. The weight of the vehicle and how much fuel it saves will have an impact on the size of your tax credit. A new energy-efficient roof for your home can also generate a tax credit of up to $500. If you bought new energy-efficient appliances for your home, these can generate tax savings, too.
Next: If Your Child's in College ...

If Your Child Is in College ...

If you have a child in college and you bought him a new computer as a present, you can get a sizeable tax credit through the Hope and Lifetime Learning Credit program. There are some provisions, though. (Aren't there always?) And they've changed a bit for 2008. First, your income can't exceed $58,000 ($116,000 for joint returns). Second, you must actually OWE tax on your return. The amount of the credit depends on your income, how much you've paid in tuition and fees, and the amount of scholarships and other deductions from tuition.
Next: If You Travel for Treatments ...

If You Travel for Medical Treatments ...

This one's tremendously helpful if you need frequent medical treatments outside the home, such as physical therapy, regular blood work, or even chemotherapy. The IRS allows you to deduct mileage if the drive is "primarily for, and essential to," medical care. The IRS evaluates the standard cents-per-mile allowance each year. For 2008, it was 19 cents a mile between January and June, and 27 cents a mile between July and December. If this little-used tax break applies to you, take advantage of it!
Next: Another One for Homeowners

If You Pay PMI ...

When you take out a first mortgage with less than 20% down, you pay a monthly private mortgage insurance (PMI). If you took your mortgage on or after January 1, 2007, that PMI expense is now deductible. Simply use Line 13 on Schedule A -- the same form that you use to deduct mortgage interest and property taxes. Your lender should make this easy by telling you the amount of your PMI premium in Box 4 of your Form 1098. This deduction is scheduled to disappear after 2010, so make the most of it while it lasts!

Next: Another One for Investors

Good News for Investors

Funny how so many investors can be SO careful with what they put in their portfolio, yet can be almost careless when it comes to deducting investment-related expenses on their taxes. Don't let that be you! Be sure to write off any and all investment publications you subscribe to. And don't forget other expenses, such as your broker's annual fees, mileage for visits to your broker, safety deposit boxes and other investment fees you may pay directly.

Next: If You Lost Your Job ...

If You Lost Your Job ...

Did you look for a job in 2008? If you looked for a job in the same field and at the same level as the one you left, you might be able to deduct your job search expenses as "miscellaneous itemized tax deductions." And even if didn't get the job, your expenses may still be deductible. Possible deductions include agency fees, resume preparation, advertising, postage, long-distance phone calls, and travel. You can claim these job-seeking expenses as long as the amount of all miscellaneous itemized tax deductions is more than 2% of your adjusted gross income (AGI).
Next: If You Have Young Kids ...

If You Have Child Under Age 17 ...

Here's another tax credit if you have children under 17 living at home: You can reduce the amount of taxes you owe by up to $1,000 for each qualifying child under the age of 17 through the Child Tax Credit. The amount of this credit begins to reduce once your income reaches $75,000 or more ($110,000 for married, filing jointly and $55,000 for married, filing separately). The credit does not affect the exemptions you take for dependents -- in fact, you can take it in addition to your exemptions. So if you have two children under 17, you can take up to a $2,000 tax credit.
Next: More Medical Deductions

Miscellaneous Medical Expenses

If you have chronic bronchitis or asthma and your physician has told you that you need to add an air conditioner or a humidifier to your home, this type of equipment can be partially deductible. Also included are specialty beds or mattresses, portable oxygen tanks, heaters and even special telephones. You can even deduct the additional electricity costs needed to operate these prescribed necessities. Remember that as far as ANY medical expenses go, only the amount over 7.5% of your income is deductible. Also make sure that the medical expenses are for you, your spouse, or any dependents for whom you paid more than half the support.
Next: It's Not Too Late ...

Still Time for an IRA Contribution

Investing in an IRA is not only great for your future, but also eases the pain when it comes time to pay the piper on April 15th. You can contribute up to $5,000 into an IRA before taxes ($6,000 if you're over 50), and deduct every penny from your taxable income. Best yet, there's still time to make your 2008 IRA contribution! You have until April 15, 2009 or the date you file your return to contribute and make the claim on your 2008 taxes.

Next: And Don't Forget ...

And Don't Forget ...

ANY costs pertaining to tax planning. These are easy to forget because they really fall under the category of "miscellaneous" itemized expenses. You can write off your tax preparation fees, plus portions of any legal or accounting fees related to your taxes. Meaning if you sat down with an attorney to review your estate, and you spent a part of that time reviewing the tax implications, that time would be tax deductible.

Next: More on the Dolans

More From the Dolans

April 15th has turned into a game of "gotcha" -- and most taxpayers lose. Ken and Daria Dolan bring you proven, simple strategies that put you on a level playing field when it comes to your taxes and all things money.

At Dolans.com, they reveal common money mistakes that will cost you dearly, debt management strategies that work and the smartest money moves for 2009.

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