Tax Deductions You Might Have Missed

As April 15th draws ever closer, many taxpayers are starting to actively hunt for tax deductions to lower their bill to Uncle Sam. Here are a few that many people miss out on.

The real estate market has obviously been on steroids for much of this decade. You could borrow money at historically low rates while also seeing property appreciate at unheard of rates. While the market has definitely slowed down in a big way, many people forget they were still active in it in 2006. By this, I mean they were playing with their mortgages in an effort to get the best possible deal.

If you refinanced or obtained a new mortgage, you can deduct the interest paid as everyone knows. Fewer people realize, however they can deduct the points paid in total or at least a portion of them. For some people, this is a huge windfall.

Assume you purchased your first home in January 2006. What a magical moment. Then you started making payments. For many people, the first payment included "points" on the loan. A point is a fee charged by the lender. One point equals one percent of the loan. If you paid points, you can deduct a percentage of them on your taxes. Assume you have a 30 year loan. You can deduct 1/30th of the points paid each year. Admittedly, that is not a huge number, but things change if you refinanced or paid off an old mortgage.

Assume you purchased a home in 2002 and paid point on the loan. In January of 2006, you refinanced your home. The points you paid on the original loan can now be deducted in full minus any previous deductions you took. For many homeowners, that is a nice round number.

My lord, going to college is getting expensive. Well, the government is going to give you a tax break on such expenses. As long as you didn't earn over $65,000 as a single filer or $130,000 as joint filers, you can deduct as much as $4,000 for higher education expenses. The expenses have to be tied to the education, to wit, tuition and books, etc. Costs associated with joining a fraternity do not count.

Going green with your cars makes tremendous sense for a number of reasons include tax savings. Buying a hybrid used to give you a juicy tax deduction of $2,000 or so. Happily, this is no longer the case. Why do I say happily? Because it has been turned into a tax credit. Tax credits are more power than deductions because they are a reduction of the actual amount of tax you are supposed to pay, not your gross income. Check with the IRS to find out the tax credit for your particular hybrid.

Many people feel tax deductions are slowly being done away with. While many loopholes have been closed, there are still plenty of deductions you can claim to cut your tax bill.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on tax deductions.