In these challenging economic times, most Americans are tightening their purse strings, keeping a close eye on their family budgets, and doing all they can to maintain their financial solvency.

But sound financial management is more than just watching the bills and cutting holiday spending. It’s also about keeping the money that’s rightfully yours—and one way to do that is to make sure you get every tax deduction allowed by law.

Tax deductions are valuable benefits in the tax code that allow you to reduce the amount of your taxable income. For some people, failure to claim deductions can mean the difference between getting a refund and having a balance due.

H&R Block urges taxpayers to look out for these commonly
overlooked deductions:

1. Medical Expenses. In addition to what you’ve spent on doctors, hospitals and medicine, other deductions include health insurance premiums, prescription eyeglasses and contacts, hearing aids, medical transportation, equipment for handicapped people and nursing home expenses.

2. State and Local Taxes. Keep track of income or sales taxes, real estate taxes, and personal property taxes.

3. Charitable Contributions. These include cash and property donated to charitable organizations, including clothing and household items. You can also deduct your auto mileage for travel related to charitable activities.

4. Out-of-Pocket Job Expenses. Most business-related expenses that aren’t reimbursed by your employer, such as costs for travel, uniforms, union dues and continuing education expenses, could be deductible.

5. Job Search Costs. Regardless of whether you land a job, you may deduct the expenses you incur while looking for a new career in your current occupation, including the costs of long distance phone calls, preparing, copying and mailing your resume or career counseling.

6. Student Loan Interest. As much as $2,500 in student loan interest can be deductible but not if the loan came from a relative or if someone else claims you as a dependant.

7. Moving Expenses. The cost of moving yourself, your family and your belongings to a new job location is deductible if requirements are met.

8. Military Reservists’ Deduction. Expenses for reservists who serve more than 100 miles from home and stay overnight can be deducted.

9. Self-Employed. You may deduct half of self-employment taxes, 100 percent of self-employed health insurance pre-miums and contributions to self-employed retirement plans (SEPs, SIMPLEs, etc.)

10. Early Withdrawal Penalties. Any forfeited interest or penalties you incurred after cashing in a CD or time deposit before its maturity date is deductible.

Other deductions also could be available. For more information about frequently overlooked tax deductions go to www.hrblock.com and click on Advice.

And Be Aware of these New Provisions for 2008

• Thinking about buying a home? A refundable tax credit for first-time homebuyers ($7,500, or 10 percent of the purchase price, whichever is lower) is available on 2008 returns. This credit is available to first-time buyers who have not owned a principal residence for the last three years.

• Homeowners who itemize their tax deductions are now able to deduct state and property taxes on their federal return. And an additional standard deduction is now available for taxpayers who own homes but don’t itemize. Single filers can deduct up to $500, and married filers up to $1,000.

• The “kiddie tax” now applies to children under 18, children who are 18 unless they are self-supporting based on earned income, and children 19-23 who are full-time students unless they are self-supporting based on earned income.

• The net long-term capital gain rate of 5 percent was eliminated in 2008.

And Here Are More Ways to Lower Your Tax Bill

Give Till It Helps. You’ll take special pleasure in contributing to your favorite charities when you know it’s reducing your tax bill. Donations made to qualified charities before year’s end can result in serious savings. But remember to itemize, itemize, itemize! Uncle Sam won’t allow for thrift store donations, for example, if you do not have a list of every cast-off winter coat and toaster oven you contribute, plus an estimated fair market value. The list must be signed off by the store.

Pay A Few Bills In Advance. Prepay a few 2009 bills and you can write them off this year. If you make your January mortgage payment this month, you’ve got an additional month of interest to deduct. If you have big medical bills, like braces for the kids, consider making all the payments before December 31. (The IRS allows families to itemize and deduct medical and dental expenses that exceed 7.5 percent of your adjusted gross income.) And if you have a flexible spending plan (tax-free earnings set aside to cover medical and dental expenses), now’s the time to use it up.

You Can’t Take It With You. So give it away! Each year the government allows you to give anyone a $12,000 tax-free gift. If you’re married, you and your spouse can combine your gift for a total of $24,000. Give to your children and grandchildren and you can actively reduce your future estate taxes.

By Casino Connection Staff

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