Six suggestions for tax savings

As Mom always used to say, “Every little bit helps.” She may have been referring to putting money away in the piggy bank, but those words of wisdom can also apply to saving money on your taxes.

You can always claim the standard deduction ($5,000 for single filers, $10,000 for married couples filing jointly), which is usually the best bet for people with uncomplicated tax situations. But depending on the amount of your charitable contributions, home mortgage payments, state taxes and business expenses, your actual deductions could be several times the standard deduction. In that case, you're missing out if you don't itemize.

To help you lower your tax bill, here is a list of often-overlooked credits and reductions to check out before sending in your tax return. 

Charitable donations
Generally, you cannot contribute more than 50 percent of your adjusted gross income (AGI), but due to Hurricane Katrina, the IRS waived that restriction for charitable gifts made between Aug. 28 and Dec. 31, and the limits are removed for any gift, regardless of the organization’s designated cause.

Acknowledgment of your largesse is necessary when your gifts are large. For a contribution of $250 or more, you must get a written receipt of your donation from the qualified organization before you can claim the deduction. Many donors are generous but not organized, says Mark Luscombe, principal analyst for tax information provider CCH Incorporated. “Most people are good at keeping track of donations by check, but not of cash or donated goods.” 

Which means you might forget to deduct all that you've given to charitable organizations, particularly if you've given cash gifts or "in-kind" donations of clothing or appliances that you can then deduct at fair-market value (i.e. what your local Goodwill will get for the item).

If you didn't keep all your receipts, Luscombe suggests you go through your check register, look through old credit card statements or give a detailed explanation of the donation, including date and amount.  Remember that donations must be made to qualified organizations, not individuals.

Education expenses
Whether you're using a 529 to save for your toddler’s college education, struggling to make tuition payments today or still paying off your own college degree, there are education-related deductions and credits for nearly every stage. There are far too many to list here, although most deductions are related to higher education. The IRS has an 82-page explanation of education tax benefits available for download from its Web site.

Home office deduction
Nearly a third of the U.S. workforce regularly works at home, but few of them are likely to claim these deductions. That’s because many of them simply don't meet the IRS's strict criteria. But if you're self-employed, your home office is your principal place of work, and your gross income is more than your related deductions, you should pass the first litmus test.

If you're a company employee, however, you can only deduct the home office if it is for your employer’s convenience. That means if you are encouraged to work at home to save the company office space, you could claim a deduction for the expenses your company doesn't reimburse. But if you negotiated with your boss for the extra perk of working from home a few days a week, no go.

Your office also needs to be a specific area of your home that is only used for business. So if you write legal briefs at a desk in your den where your kids also play, you won’t pass the “exclusive use” rule. If you do have a specific home office space, the IRS allows you to deduct a portion of your home’s expenses, including mortgage or rent, utilities and repairs.

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