Since my parents have owned restaurants, they have had an accountant do their taxes. Now they are retired so no more accountant, and now I will do my own taxes for the first time.
I started doing a bunch of research about tax returns, which mostly meant going through my old taxes and seeing what our accountant was doing. I was especially interested in the tax benefits you get from donating money, since many people have been donating because of the Tsunami.
Here are a few interesting things I have found. More info will undoubtedly come later:
1. Local and state income taxes count as a deduction. Depending on how much your state takes, and how much you make, this might make it worthwhile to itemize your deductions and not take the standard deduction. Apparently not a lot of people know this.
2. If you do fall above the standard deduction, then charitable contributions are fully deductible. That means for every $100 you donate, you will get a full $25-30 back. This is quite significant and means you can donate more money to charities than you previously thought.
3. If you donate for Tsunami relief before January 31, 2005, you can that deduction on your 2004 tax return. This is because of a special bill that Bush signed.
Click here for info. This is great because it means you can donate now, and get the refund by this April, and not have to wait until April 2006.
4. One of the new deductions for 2004 and 2005 is you can deduct sales tax you pay, *instead* of deducting state income tax. You basically deduct whichever is greater. This will only be interesting to people who live in states with little to no state income tax, *and* who paid a lot of sales tax in the year (purchased a car, etc)
I'm actually pretty excited about doing my taxes. I think it will be a really good learning experience. I still haven't decided if I'm going to use Turbo Tax though. Just doing it on paper seems pretty straight forward. Opinions?