How To Maximize Your Federal Income Tax Deductions

by | business cash flow management

It’s the 2009 tax season, and you should already be looking for those federal income tax deductions that can legally lower your tax bill.

Here are a number of the typical deductions that you want to make sure your tax preparer knows about so you get the full federal income tax deduction allowed.

2009 Mileage Deductions

Business Mileage 55-cents per mile
Charitable Work Mileage 14-cents per mile
Medical & Moving Mileage 24-cents per mile

Tax Benefits For Education

There are a number of 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 tax credits, who can claim them, what expenses qualify, and more, visit the website 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.

For each dependent, whoever prepares your income taxes 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 2009.

$5,700 – Single or Married filing Separately
$11,400 – Married filing jointly or qualified widow(er)
$8,350 – Head of Household

Here is a partial list of Schedule A deductions – for details visit the website 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
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 are not filing Form 2106)
10. Tax preparation fees paid to a professional

Special Schedule A Deductions for 2009 – Certain Cash Contributions for Haiti Relief Can Be Deducted on Your 2009 Tax Return

A new law allows you to choose to deduct certain charitable contributions of
money on your 2009 tax return instead of your 2010 return. The contributions
must have been made after January 11, 2010, and before March 1, 2010, for the
relief of victims in areas affected by the January 12, 2010, earthquake in Haiti.

Contributions of money include contributions made by cash, check, money order,
credit card, charge card, debit card, or via cell phone.

The new law was enacted after the 2009 forms, instructions, and publications
had already been printed. When preparing your 2009 tax return, you may
complete the forms as if these contributions were made on December 31, 2009,
instead of in 2010. To deduct your charitable contributions, you must itemize
deductions on Schedule A (Form 1040) or Schedule A (Form 1040NR).

The contribution must be made to a qualified organization and meet all other
requirements for charitable contribution deductions. However, if you made the
contribution by phone or text message, a telephone bill showing the name of the
donee organization, the date of the contribution, and the amount of the
contribution will satisfy the recordkeeping requirement. If, for example,
you made a $10 charitable contribution by text message that was charged to
your telephone or wireless account, a bill from your telecommunications
company containing this information satisfies the recordkeeping requirement.

Schedule E Deductions for Rental Properties

If you own rental properties then the income and deductions go on Schedule E.

Here is a partial list of Schedule E deductions you can take on rental properties – for details visit the website 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.

And now I would like to invite you to claim your FREE Debt Reduction Solutions Guide and join the millions who are on the path to becoming debt free.