10 Common Deductions You Can Easily Claim in US Federal Tax Filing

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Inspite of repeated reminder from IRS, taxpayers do this blunder every year. They overpay their taxes just because of overlooking or ignoring tax deduction, they are eligible for. Reports suggest that about 46 million of us itemize on our 1040s — claiming nearly $1 trillion worth of deductions. The missed deductions can cost you most. So, friends be cautious! follow every possible trick and don’t pay too much. Learn about the most common deductions that can save you millions of dollar.

1. State sales taxes.

Income-tax deduction is a better deal than sales taxes when it comes to choose between deducting state and local income taxes or state and local sales taxes. There are some states that do not impose an income tax. You can check out the IRS tables to find how much residents of various states can deduct. But remind that you have to pay additional if you purchase a vehicle, boat or airplane.

2. Student-loan interest paid by Mom and Dad

A student who is not claimed as a dependent can deduct up to $2,500 of student-loan interest paid by Mom and Dad.

3. Child-care credit

Credit is better than a deduction because it reduces your tax bill dollar for dollar. Whereas, a deduction simply reduces the amount of income that’s subject to tax.

4. Moving expenses to take your first job.

To qualify for the deduction, your first job must be at least 50 miles away from your old home. If qualifies, you can avail deduction on the cost of getting yourself and your household goods to the new area. This includes 24 cents per mile for driving your own vehicle for a 2009 move, plus parking fees and tolls. The standard rate for 2010 moves is 16 cents a mile.

5. Hope credit for college juniors and seniors.

College goers know that $1,800 Hope credit is given only for the first two years of college and afterward the lower Lifetime Learning credit applies. But do you know that the tax law has been updated in 2009? The credit has been renamed, increased and expanded. It’s now called the American Opportunity Credit and will rebate up to $2,500 for each qualifying student for the first four years of college.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.

6. Property-tax deduction for nonitemizers.

Normally, to write off property taxes, you must itemize deductions. The new rule start working from 2009, lets homeowners who don’t itemize boost their standard-deduction amount by up to $500, if they are single and up to $1,000 if they’re married.

7. Out-of-pocket charitable contributions.

Don’t hesitate to claim deduction for the charitable works you have carried out throughout a year. If you have prepared food for a nonprofitable organization or raised fund for your school or any other charity, you are eligible for payroll deduction. For instance, If you drove your car for charity in 2009, remember to deduct 14 cents per mile.

8. Reinvested dividends.

If you are investing in mutual fund, you must know that dividends are automatically used to buy extra shares and each investment increases your tax basis in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. If you forget to include the reinvested dividends in your basis, it will result double taxation of the dividends. Don’t make this major mistake. If you are not sure about your basis, ask the fund for help.

9. Military reservists’ travel expenses.

This is to help the members of National Guard or military reserve for claiming tax deduction. To be eligible for this deduction they have to travel more than 100 miles from home and be away from home overnight. If they qualify, they can deduct the cost of their meals. In addition, 55 cents per mile for 2009 driving own car to get to and from drills will also be deducted. Parking fees and tolls are also considered regardless of whether they itemize.

10. Home-buyer credit.

Only the first-time home buyers qualified for this credit. A “first-time buyer” is considered as someone who didn’t own a home in the last three years. Prior to November 6, 2009, $8,000 credit was given to first-time home buyers. But now in addition to $8,000, there is a $6,500 credit for longtime homeowners, who continuously owned a home for at least five of the eight years.