For most people, tax time is not a favorite time of year. The prospect of filling out reams of confusing paperwork is daunting enough, but for many, the sheer volume of money that they pay can be startling. Luckily, you can claim many things on your tax forms that will reduce the amount of taxes you must pay and potentially increase your return.
Video of the Day
The IRS code allows the taxpayer to deduct any taxes that they paid to the state they live in, though they can only deduct either the sales tax or the state income tax. For taxpayers living in a state that levies a state income tax, this income tax is typically the higher of the two. However, if the taxpayer recently purchased a house, a boat, a plane or a vehicle, then that sales tax can also be added to the sales tax total and may exceed the income tax for that year. The IRS maintains a state tax calculator on its website to help you figure out whether the income tax or the sales tax is a better deal.
While its fairly easy to remember to deduct the huge financial contributions you make throughout the year, don't forget to also add up the smaller things as well. If you made something for the local soup kitchen or church charity dinner, you can deduct the cost of the ingredients. If you used your car to drive anywhere in the service of charity, you can deduct 14 cents a mile. Even if you did something as small as buying supplies for a school or church's fundraising event, you can deduct the costs from your taxes.
If you make certain upgrades to your home to make them more energy efficient, then you can deduct some of the costs for those improvements from your taxes. There is a 10 percent tax credit, up to a lifetime maximum of $500, for doing things like replacing old windows and doors, using biomass stoves, high-efficiency air conditioners and furnaces and even water heaters. A 30 percent credit with no limit is available for installing things like solar panels and wind turbines that count as alternative energy sources as well.