Using tax deductions to keep more cash in your pocket

LOUISVILLE, KY (WAVE)- We're now six weeks away from the dreaded April 15th deadline.  Whether you'll need to pay or you're expecting a refund, knowing and using all the deductions your entitled can keep serious money in your pocket.

If you're filing a basic return, a W-2 only with minimal deductions, you can probably handle that yourself.  If your return is more complicated, "they want someone that's knowledgeable, familiar with the tax law changes, understand the federal and state differences and can take advantage of the deductions" says Stephen Lukinovich, president of the Kentucky Society of CPAs.  

Those deductions can include education and child care tax credits, dependent exemptions, real estate investment deductions.  And because tax laws change every year, on every level it can be tough to keep up.

For self-employed and small business owners especially, there's much to gain by using all possible deductions.  Personal expenses can actually become business expenses, at least a percentage of them, including high speed internet, cell phone, your car insurance or even your mileage and square footage of a home office.

Some often over-looked deductions include "money you're putting away in CDs or savings or saving for the kids" says nationally known fitness advisor, Sonyika Calloway Boyce.

"I think self employed individuals are confused and they're not aware of the retirement plan deduction that they're entitled to" Lukinovich said.

Also add in any big medical expenses paid out of pocket, for example weight loss surgery or fertility treatments.  Anything beyond 7 1/2% of total income can be figured in to a deduction.

And new this year, the 2% payroll tax cut that became effective in 2011 and can be counted for the first time with this filing.

If in doubt or uncertain about a deduction, it's important to find out, or just leave out.
Also remember, you do need receipts for charitable cash donations no matter how small.
Lukinovich says most audits are random, but if there's a red flag, like your donations are out of line with your annual income, that could send the IRS your way.