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Review most common overlooked tax deductions

March 10, 2010 12:00:00 AM PST
For many of us, doing our income taxes is about as appealing as having our teeth pulled. If you've put off filing your 1040s, don't fret. There are some new tax breaks and valuable tax tips that can help make your tax experience less painful.2009 was a financially stressful year for many. The unemployment rate broke record and personal income saw a decline. But the struggling economy also led lawmakers to enact a stimulus package that included tax breaks for consumers.

Last summer's 'Cash for Clunkers' program led to a surge in automobile sales. If you cashed in your clunker, the money you received towards the purchase of a new more fuel-efficient model is not taxable.

If you bought any new vehicle between February 16th and December 31st, you can deduct the cost of the sales tax up to $49,500 of the purchase price.

"It's important for the sales tax deduction for the new car because about two-thirds nationally of all taxpayers, here in California is probably less, don't itemize. They take the standard deduction," said Raphael Tulino, IRS.

Homeowners who made energy-efficient improvements to their homes last year, including solar panels, insulation, and energy-efficient heating and air conditioning systems, can claim a credit of 30 percent of the purchase price and installation up to $1,500.

First-time homeowners can get a credit up to 10 percent of the cost of the house up to $8,000. And, if you buy a home up until May 1st of this year, you can claim the credit on your 2009 or 2010 returns. This is a refundable credit, so even if you owe the IRS nothing, the government will still send you an $8,000 check.

The powerful earthquake that devastated Haiti in January, led to an outpouring of relief efforts. The IRS says people who made cash contributions for charities benefiting Haiti can claim a deduction on their returns for either 2009 or 2010.

"So, basically, it gives you an immediate deduction for making contributions for Haitian relief for the earthquake. If you choose to, as long as you take it before March 1st or you can elect to do it next year for 2010 because normally when you take a deduction it's in the year you incur it," said Tulino.

You can deduct cash contributions to Haiti Relief made by text message, check, credit card or debit card.

On Wednesday, the House passed a bill to allow taxpayers to write off donations to the Chile quake relief efforts and extend the deadline for Haiti donations to April 15th. That bill now goes to the senate.

If you have any questions regarding your taxes, ABC7 is holding a live Tax Tip Hotline on Thursday at 4 p.m. where a team of accountants will be available on the phone.


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