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Tax Write-Offs to Take Advantage Of

With today’s current economic meltdown impacting everyone’s wallet, consumers are looking for ways to save some money.

Fortunately, there are several ways in which tax payers can save money on taxes.

From tax deductions to tax credits, the federal government offers a variety of ways to help out American consumers. Here are a just a few tax write-offs of which you can take advantage:

Interest on Certain Loans

There are certain types of loans with tax-deductible interest.

One of the most common is interest paid on your mortgage, which includes any points you might have paid to secure a lower interest rate on the home loan. Furthermore, the interest paid on home equity loans or lines of credit also is tax-deductible in most cases. Additionally, any private mortgage insurance payments you make also might be tax-deductible – this special tax provision extends through 2010.

Another common loan-related tax deduction is the interest paid on any educational loans you might have. You are able to write-off this interest if you paid interest on a qualified student loan during the appropriate tax year; your filing status is not “married filing separately”; your modified adjusted gross income is less than $70,000, or $145,000 if filing jointly; and you and your spouse, if filing jointly, cannot be claimed as dependents on another person’s tax return.

Deductible Taxes

You also are able to write-off certain taxes that you pay throughout the year. There are four types of non-business taxes that you can deduct:

  • Any state, local or foreign income taxes you pay during the appropriate tax year.
  • Any real estate taxes you pay, such as property taxes on your home.
  • Personal property taxes, such as the cost to register your vehicle.
  • State and local sales taxes, if you do not deduct state or local income taxes.

Tax Credits

In addition to deductible taxes, there are several tax credits of which you can take advantage when filing your taxes:

  • Earned Income Tax Credit: Applies to certain tax payers who earned income from an employer or through self-employment during the appropriate tax year.
  • Child or Dependent Care Credit: Applies to certain costs associated with caring for a child or an adult who is mentally and/or physically unable to care for him or herself.
  • Adoption Credit: Applies to certain expenses related to the adoption of a child.
  • First-Time Homebuyer Credit: Applies to those who purchased a home for the first time during the appropriate tax year – this credit accounts for 10 percent of the home’s purchasing price, up to $8,000.
  • Retirement Savings Contributions Credit: Applies to eligible contributions made to an employer-sponsored retirement plan or to an individual retirement arrangement, commonly referred to as an IRA.

Non-Business Expenses

There also are a variety of non-business expenses that you can deduct from your taxes, including:

  • Medical and Dental Expenses: These are any expenses paid for the prevention or alleviation of a physical or mental defect or illness. You can deduct only the amount of medical expenses that exceed 7.5 percent of your adjusted gross income.
  • Educational Expenses: These are any work-related educational expenses paid that will maintain or improve your job performance or is required by your employer or by law to maintain your salary, status or job.
  • Unreimbursed Employee Expenses: These are any work-related expenses not reimbursed by your employer. They can include costs associated with setting up a home office, malpractice insurance fees and even job search expenses as long as you searched within your current occupation.
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