Tax Deduction Strategies

Deduct as much as you can legally. Itemize deductions to see if that results in a higher number than the current standard deduction amount.

For increased tax deductions, estimate your remaining tax liability for state and local taxes and consider paying these amounts before year-end. However, it may make sense to defer these deductions if you anticipate being in a higher tax bracket next year or if the added deductions push you into owing alternative minimum tax. Crunch the numbers to see which offers greater benefits.

It is also popular to bunch deductions together, including property taxes and charitable contributions, to qualify for a higher itemized deduction amount than the standard deduction for a given year.

Frequently Overlooked Deductions

There are many expenses that you may incur throughout the course of the year that are tax deductible. Frequently overlooked tax deductions include the following:

Unreimbursed Employee or Teacher Expenses

You can claim business expense deductions for work-related expenses if your employer does not reimburse you for them. Common work-related expenses that are often overlooked include general business and special clothing needs, travel, meals and tips, education, and job hunting.

Charitable Contributions

Contributions to qualified charities are generally fully deductible, unless you give more than 50% of your adjusted gross income.

Home Office Deduction

If you use your home office for administrative or management activities of a trade or business, with no other fixed place where you conduct those activities, you can take a home office deduction. Even if you have a regular full-time job with an employer, a sideline job can support a home-office deduction.

Computer Expenses

You stand the best chance of writing off computer costs if you are self-employed or if you have a sideline business. If you are a salaried worker, in order to deduct PC costs, the computer must be required by your employer 'as a condition of employment. for unreimbursed computer costs to be deductible. Generally that means the computer must be for the employer's convenience, not yours.

Moving Expenses

You do not need to itemize to claim a moving expense deduction. In order to take the deduction per the IRS, however, you must pass a job location distance test and a work time test.

Volunteer Activities

Although you cannot deduct the cost of your time, you can take a charitable deduction for automobile expenses, including mileage, parking fees, tolls, other travel costs, and phone expenses. You can also deduct any out-of-pocket costs for supplies paid.