How to Cheat on Your Income Taxes – Legally

IRS logoThe day taxes are due (April 17th) is fast approaching, and tension is in the air. No one likes sending more money to Washington than they absolutely have to.

Even though most of us pay our taxes on time and in full, few of us don’t always consider how we could bring down our tax bill, and do it legally.

With that in mind, consider home improvements where you can actually get a tax deduction.

Home Improvement Write-Offs on Taxes

You can actually get a break on your taxes for alterations that make your home more energy efficient. This break, the Energy Efficiency Tax Credit, can be claimed by home owners who replace or upgrade portions of their house’s envelope. If you improve the windows, walls, roof, insulation, siding — basically any part of the home that touches the outside air, you can claim some portion on your taxes.

That’s not all: If you switch out your water heater or air conditioning system for a more efficient model, you might be able to take the credit. On the bright side, this deduction is still available for 2011. Unfortunately, though, you can only take it for one year, which means that if you applied for it in 2006, 2007, 2009 or 2010, you’re out of luck.

But even if you’ve already used the Energy Efficiency Tax Credit, you have a few other options for home improvement breaks on your taxes. For example, if you install fuel cells, solar cells, geothermal systems, or solar hot water heaters, you may be able to claim a deduction of up to 30% of the total installation price.

Home improvements can even be a money maker: If you produce more electricity than you use, you can often sell it back to the electrical grid. To sweeten the pot, the federal government doesn’t tax this income, so if your fuel cells, solar cells and geothermal system leave you with more electricity than you need, you might find yourself running a tax-free business!

Other Deductions Often Overlooked on Taxes

One other often forgotten write-off involves charity. Everyone knows you can claim a deduction for all those clothes you cart to Goodwill or the Salvation Army, but you can also claim the cost of the gas you spent hauling your stuff over there. Whenever you drive somewhere to perform volunteer work, you can claim the standard mileage rate for deductions, which varies from year to year. Check the current tax allowances for such deductions at the IRS Website.

Finding all the little breaks you have coming to you can be rewarding — both emotionally and financially. Good luck, and happy hunting!

Long Island NY Real Estate Tax Deductions You’re Losing

Tax FormsThere are 2 important Long Island NY real estate tax deductions you won’t be able to claim in 2012.

Congress was so busy bickering at the end of 2011 that it allowed two important tax breaks for home owners to expire.

Long Island NY Real Estate Deductions We Lose in 2012

1. You can no longer deduct the cost of private mortgage insurance premiums.

2. You aren’t getting a tax credit for some of your home energy improvements.

You can take advantage of these provisions when you file your 2011 tax return — but beyond that, who knows?

Private Mortgage Insurance

Up until the end of last year, you could deduct your private mortgage insurance premium (PMI) when calculating your income taxes. It was a benefit targeted to lower- and middle-income home owners. Once you made $100,000 or more, it started disappearing and anyone who had more than $110,000 of adjusted gross income couldn’t use it.

The home owners who have to get mortgage insurance are Long Island NY real estate buyers with less than a 20% down payment and refinancers with less than 20% equity. That’s more often first-time home buyers or younger home owners and less often move-up buyers who’ve built up equity in their homes. So in taking away the PMI deduction, Congress is raising taxes paid by first-time home buyers and younger home owners leaving them with less money to spend on housing. That’s especially headed in the wrong direction when the housing market is struggling to recover.

Energy Tax Credit

The tax credit for energy efficiency upgrades on Long Island NY real estate wasn’t enormous — it was capped at $500 or 10% of the cost for some projects; less for others. But it was a nice incentive to add insulation, new windows, or to upgrade your HVAC system with a more efficient unit.

Home ownership and energy independence advocates will fight to get those expired tax rules back on the books in 2012 and to have them apply retroactively. It’s a familiar fight — they had to do the same thing at the end of 2010. The battle this year is more complicated however, since we’re in an election year.

Most of us consider the renewal of those policies is a no-brainer. And we really don’t appreciate it when Congress lets those rules expire at the end of one year and then leaves us to wonder the rest of the next year whether they’ll be renewed.

Will you be claiming either of these Long Island NY real estate tax breaks on your 2011 returns?