Take Advantage of Above-the-Line Deductions

• Above-the-line deductions are essentially free deductions because you can take them without giving up the standard deduction. In order to claim them, you will need to use Form 1040A or Form 1040 depending on which ones you claim. Though these tax forms are longer than the 1040 EZ and take longer to fill out, you can save yourself some extra money. If you only claim above-the-line deductions for money you put in your IRA, interest you paid on student loans and higher education costs, you can file using the shorter Form 1040 A.
  
  

Keep Track of Your Mileage

• There are several deductions that can be increased by including the miles you drive as part of your expenses. If you drive your own vehicle as part of your job, such as making sales calls, or drive from your first job to a second job, you can take a deduction as a business expense. Miles driven to your job from home are not deductible. For 2009, the business mileage rate is $0.55 per mile. If you make a job-related move and claim the moving deduction, you can deduct $0.24 per mile in 2009. Miles driven to reach medical care can be added to your medical expenses deduction at the rate of $0.24 per mile in 2009. If you take the charitable donations deduction and drive as part of your work, you can deduct $0.14 per mile in 2009.
  
  

Self-Employment Deduction Flags

• The IRS audits about 1.5 percent of self-employed tax returns versus 1 percent of returns filed by traditional employees because it is easier for self-employed people to try to hide income or take extra deductions that they might not qualify for. Car costs are the most common red flag. Though you are entitled to deduct business expenses related to your car, you must document your mileage carefully. In addition, if you are claiming food or entertainment costs as a business expense, be sure to document why it should count as a business expense. Usually, a good rule of thumb is if you would have bought the item or spent the money if your business didn't exist, you cannot deduct it.