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Learning how to get tax breaks is easy if you plan in advance and keep good records. Mahalo has put together this list of tips, as well as some commonly overlooked tax breaks, to help make mid-April as painless as possible.
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Learning how to get tax breaks is easy if you plan in advance and keep good records. Mahalo has put together this list of tips, as well as some commonly overlooked tax breaks, to help make mid-April as painless as possible.
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Introduction
- As of 2009, the U.S. tax code was 67,204 pages long. However, there are a number of things that a taxpayer can do to take advantage of tax breaks without having to read the code front-to-back.
Step 1: Itemizing Versus Standard Deduction
- Itemizing can often, but not always, save you money on your taxes. Make sure to calculate your taxes using the standard deduction amounts to see which one comes out best.
Step 2: Organize
- To make sure you can itemize effectively, you need to be able to look at your finances and see what you have done that might qualify you for a tax break. This includes business and work expenses, major purchases, and transfers of money to or from savings accounts, retirement accounts or investments. Keep your financial data (receipts, bank statements and other proofs of purchase) well-organized in a secure place.
Step 3: Hire a Tax Professional
- The tax code, which is hundreds of pages long and changes every year, is admittedly confusing. A financial planner or CPA can look at your books in the off season and help you to optimize your tax breaks. They may not prepare your taxes, but they can prepare you for the best tax situation possible.
Step 4: Expenses
- Home offices, work expenses, and expenses that teachers incur can usually be deducted to reduce your amount of taxable income. Education expenses, if you or a child are going to school, can also be counted in most cases.
Step 5: Homeowner Tax Breaks
- There are several breaks a homeowner can get for 2009. Many homeowners can deduct interest they pay on their mortgages, and people who are new homeowners or have not bought a home in more than three years can be eligible for a tax credit. Also, anyone whose house was foreclosed on will not need to count the debt they still owe on the loan as income.
Step 6: Give to Charity
- You can usually deduct any items that you gave to charity, or anything that you bought for a charitable purpose like an after school group. You can also deduct mileage expenses incurred driving to the charity work. Also, many state tax laws offer refunds for donating money to charity.
Step 8: Use a Software Program
- Software programs like TurboTax are set up with the latest tax laws embedded in them. When you are preparing your tax returns, they can help optimize your tax breaks by asking you questions about possible tax breaks you might not otherwise know about.