Want to save thousands on your taxes? Consider buying a home. Without a doubt, the home mortgage interest deduction is a major perk of home ownership: the mortgage interest you pay on your home reduces your taxable income. The first-year interest payments on a $180,000 30-year fixed rate home loan at 5.01 percent add up to almost $9,000. That’s a lot of interest paid, but it’s also a huge tax deduction.

If you’re getting ready to buy your first home or are a new homeowner, here’s what you need to know—in plain English—about the home mortgage interest deduction. [...]

Picture this: You’ve just completed your tax return for the year. You’re stoked because you qualified for a ton of deductions this year, so you’re getting a huge refund. You are about to send of your tax return and sit back and wait for a hefty check in the mail, when someone utters three terrifying words to you: Alternative Minimum Tax (AMT).

If you claim a great deal of tax deductions, beware of this silent killer. The alternative minimum tax can come out of nowhere and require you to pay more tax than you ever thought possible.

Here are some facts on the alternative minimum tax so you know what to look out for if your deductions start stacking up this year: [...]

Have you ever wondered if you can itemize deductions on your tax return? Actually, have you ever wondered what, exactly, itemizing means? If so, you’ve come to the right place. I’m going to teach you the basics of itemizing: What itemizing is, whether or not you qualify to itemize and, if so, how to do it.

What Does It Mean To “Itemize Deductions”?

When you’re filling out your federal tax return this year, you’ll be asked to either calculate your itemized deductions or to take the standard deduction—an amount predefined by the IRS and based upon your filing status (e.g., single or married filing jointly). If you don’t qualify to itemize deductions, you will choose the standard deduction.

To find your taxable income, you must subtract the standard or itemized deduction from your Adjusted Gross Income (AGI). To be blunt, these deductions are our friends because they lower the amount of taxes that we have to pay.

Itemized deductions are comprised of various types of certain expenses that you incur throughout the year (things that are—surprise, surprise—“tax-deductable”). If the total amount of these expenses is greater than the standard deduction amount, you should itemize instead of taking the standard deduction.

For example, the 2009 standard deduction for single taxpayers is $5,700. If the amount you spent on qualified itemized deductions (see below) is greater than $5,700, then you should itemize on your tax return. [...]

The stress of tax time comes from organizing paperwork, crunching numbers, meeting deadlines and—oh yes—that slight but persistent possibility of having somebody go through your tax return with a magnifying glass looking for errors and omissions. I’m talking, of course, about an audit. If you’ve ever spent sleepless nights worrying about whether or not you will be audited, the following statistics will either put your mind at ease or leave you clutching for another Ambien.

These stats are taken and simplified from the Internal Revenue Services’ Fiscal Year 2009 Enforcement Results, their fuzzy way of saying audits.

• Total 2009 IRS enforcement employees: 21,059
• Total revenue collected from enforcement: $48.9 billion

• Total individual taxpayer returns filed in 2009: 138,949,670
• Field audits: 326,249
• Correspondence audits: 1,099,639
• Percentage of returns audited: 1.03 percent

For comparison, in 2000, only 0.49 percent of individual returns were audited by 20,832 enforcement employees. An increase in electronic filing is probably making it possible for the same number of employees to audit more returns. But I wonder if it’s also safe to assume that when economic times get tougher, so does tax enforcement. The less Americans earn, the more Uncle Sam needs to squeeze from those who are earning.

But here’s where this gets interesting. The more you earn, the more likely you will face an audit. [...]

It’s nearly that time of year again. The stress. The procrastination. The arithmetic. The missing receipts. That’s right; it’s almost tax time!

Filing taxes and decoding IRS lingo may be some people’s idea of a good time, but for the rest of us, it may make more sense to hire a professional tax preparer or accountant to take care of our 2009 tax returns.

But how do you know if you really need the help of a professional tax preparer? Ask yourself the following questions before deciding to hire a professional to prepare your taxes. [...]

Say you inherit, win, or earn $3,000, $30,000, or even $300,000. Lucky you.

What should you do with a windfall of money?

You may be inclined to spend it; to buy a new ride or take the trip you’ve been longing for. The urge to splurge is normal; people are more likely to spend unanticipated money (i.e., a windfall) than anticipated money, like wages (Arkes, Joyner, et. al., 1994). Unfortunately, spending your windfall—or at least all of it—probably isn’t the best move.

Here’s a prioritized list of arguably the best ways to use a windfall. Your individual situation may dictate deviating from this list slightly, but this is solid foundation for planning how to use unexpected money. (Note: You may decide to split your windfall among a few of these goals; that’s fine.) [...]

For most of us, tax season is anything but a good time. That said, you may just find some fun in unearthing some hidden tax breaks that you’ve been missing out on! And it’s a good year for it: the American Recovery & Reinvestment Act (ARRA) of 2009 created several completely new tax credits and deductions.

Here are six tax adjustments that could save you big bucks this year: [...]

Good news for prospective home-buyers: It looks like Congress will extend the $8,000 first-time home buyer tax credit that was slated to end this month and add a $6,500 tax credit for those that have already owned a home.

The Senate voted 98-0 Wednesday to extend and expand the tax credit and the House could vote on the bill as early as today. If passed, the $8,000 tax credit would remain in effect for first-time home buyers — or anyone who hasn’t owned a home in the last three years. [...]

The $8,000 first-time home buyer tax credit program has been such a success, Washington is asking: Can we live without it? That credit is set to expire on December 1, 2009, but Sen. Johnny Isakson, (R-Ga.), has introduced legislation that would provide a $15,000 home buyer tax credit to any home buyer (not just first timers) who occupy the home they purchase for at least two years. Are you a prospective first-time home buyer? Here’s your gamble: Act quickly to take advantage of the $8,000 tax credit before it expires, or wait to see if the $15,000 home buyer tax credit becomes law.

Isakson’s proposed legislation would make available up to a $15,000 tax credit for any home buyer of any home over the next year. It would also remove the income limits that currently apply to the first-time home buyer tax credit. In a press release on the Senator’s Website, he says:

“If we do this, home values will return, unemployment will go down, our economy will turn, and consumer price confidence will go up. I would submit it is a part of the main solution we need to take an economy that is on the bottom and move it back toward equilibrium and prosperity for America.”

Another bill recently introduced would extend the $8,000 first-time home buyer tax credit for another six months. If this bill passes, first-time home buyers would have more time to claim the existing credit, although the rules would remain the same. (The tax credit would only apply to first-time home buyers and income caps would remain in place).

I predict that the first-time home buyer tax credit will be extended but Congress debates expanding the program to a $15,000 home buyer tax credit for a long time. If the expansion passes, I would bet it will include limitations (or even be for less than $15,000). What do you think? Is expanding the credit a good idea, or has the first-time home buyer tax credit run its course?

PS: If you’re looking for answers on the existing tax credit, visit my FAQ on the first-time home buyer tax credit or brief guide on how to buy your first home.

My father drives an old Lincoln town car that has over 300,000 miles on it. That’s right, 300,000. Not only does he drive it, but he commutes over 90 miles each way in it, every day. Everybody who knows him thinks he should have gotten a new car oh, about 100,000 miles ago. But my dad is fanatically frugal and, perhaps more importantly, he simply likes his car. He’s determined to drive that old Lincoln until it simply doesn’t want to drive anymore. Unless the so-called “cash-for-clunkers” bill becomes law. The bill (which the House passed it today) could offer drivers like my dad up to $4,500 towards a new, more fuel-efficient ride. What’s the cash-for-clunkers bill all about? And could you benefit? [...]