Spring may be welcome for ushering in blue skies and blooming flowers, it also marks the arrival of Tax Day – April 15.
Whether you’re used to getting money back or giving it up in droves, chances are you want to find more ways to pay less during the year and possibly increase what you get back when it comes time to file your tax returns.
Fortunately, the Internal Revenue Service offers plenty of lesser-known deduction options that could well be part of your everyday life.
• Deduct gasoline costs. Escalating gas costs have many people concerned. But the amount you drive might actually help you when tax time comes. While the rate changes each year, in 2005 the mileage rate for business users was 40.5 cents per mile.
Consult the IRS or your tax preparer if you use your vehicle solely for business purposes. It’s a good idea to save gas receipts as well, in order to get an accurate total of what you can deduct.
• Deduct based on the car you drive. Hybrid cars are not eligible for the electric vehicle credit, but might be eligible for a clean fuel deduction. This is a one-time deduction per vehicle (so if you’ve used it already and still own the same vehicle, you’re ineligible).
This deduction is limited to distinct makes and models, which include the 2005 Ford Escape and the 2001-2005 Toyota Prius. While the deduction for certified vehicles was once $2,000, in 2006 the IRS will only give out a $500 deduction.
In addition to fuel-burning deductions, sport utility vehicles used for business purposes (not including your daily commute) might be eligible for a depreciation deduction. Again, it’s best to consult the IRS or a tax preparer to see if you qualify.
• Work from home deduction. If you have a home office that is used strictly for work, you can deduct the cost of home-office expenses. For instance, a personal computer you buy and use for business can be deducted.
However, if your son or daughter uses that computer to do their homework, you’re no longer allowed to deduct the cost of the computer. Other expenses, such as rent, insurance, mortgage interest and utilities might also be deductible depending on your situation.
• Charity pays off. In addition to being able to deduct monetary donations to charity, vehicles donated to charity can also be deducted. When donating a car to charity, you’re entitled to deduct the fair market value of the vehicle on your tax return.
The IRS defines fair market value as the amount you’d expect to get in return for the car if had you simply sold it. Oftentimes, charities that accept vehicle donations will provide you with the amount you’re allowed to deduct, as well as the necessary tax forms you’ll need to attach to your return.
To learn more about various deductions you may be eligible for, go online to the IRS Web site at www.irs.gov.
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