Itemizing Deductions

• Many of the most potentially lucrative tax deductions, like the one for mortgage interest and the one for real estate and property taxes, are only available to taxpayers who itemize. When you start your tax planning for the year, part of that planning should be to compare the total of your expected itemized deductions to the standard deduction provided by the IRS. If your total itemized deductions are less than the standard deduction, you cannot claim a tax deduction for mortgage interest, real estate taxes, charitable contributions or medical expenses. Knowing where you stand ahead of time makes it a lot easier to plan an effective tax strategy.
  
  

Look for Double Benefits

• You can maximize the value of your tax deductions by seeking out those deductions that provide you with a double benefit. For instance, contributing to a 401k or Individual Retirement Account not only provides you with a vital tax deduction. Those retirement plan contributions also help you build the type of nest egg you will need for a comfortable retirement. Putting money into a flexible savings account or a health savings accounts lowers your tax bill, but those accounts also help you control your health care spending.
  
  

Understand Requirements

• Before you take any tax deduction, you first need to understand the requirements and make sure you meet the qualifications. For instance, if you work at home, you can take a tax deduction for a home office, but only if that home office is used exclusively for business. You might have trouble justifying a home office located in a corner or your bedroom, or in the den with a big screen TV and game system. Read the qualifications for each tax deduction carefully to make sure you are eligible to take that deduction.
  
  

Keep Receipts

• Whenever you take any type of tax deduction you need to document the costs carefully and keep copies of all receipts related to that tax deduction. If you have a scanner or multi-function printer, scan each receipt you plan to use for tax purposes and keep those images in a special folder. That way when tax time rolls around you will be prepared, and you will have a permanent copy of those deductions in case any questions arise later on.