As with everything else related to the American tax process, the exact determination of what is deductible and to what extent an expense can be deducted varies widely and can get extremely complex. Nevertheless, the basic rule is that the expense has to meet the IRS definition of the term “ordinary” and “necessary”. By “ordinary” the IRS means that the expense has to be something that is both common and accepted in your trade, business, or industry. When the IRS says “necessary” it means that the expense has to helpful and appropriate for your business, it does not mean that the expense has to be indispensable.

The general rule described above notwithstanding, not all expenses that you may see as “ordinary” and “necessary” may be deductable. Costs of goods sold (comparative inventories over the tax year), capital expenses (such as assets and improvements), and personal expenses are generally not considered deductible by the IRS. Further, there are many “gray” expenses that may or may not be deductible and in these cases it is the IRS definitions that matter, not your personal interpretation of the tax code. While deductions can – and do – save small businesses a significant amount of money every year, they can be very complicated and the language can be misleading. Therefore it is a good idea to consult with a tax professional when deciding what to claim as deductions for your small business.

The 1040EZ contains six sections to be completed on only one sheet of paper. However, not everyone can use this form to complete their tax return. It is limited to single and married joint filers who have earned less than $100,000 for the previous tax year and are less than 65 years of age. Also, those persons wishing to itemize their deductions cannot use this form as it only utilizes the standard deductions provided by the IRS. In addition, the 1040 forms is not the correct form for taxpayers that will be declaring dependents. People who were blind at the end of the tax year need to use the 1040A or long form to take advantage of the specific deductions for their disability.

The 1040EZ also has restrictions on the credits and incomes that can be declared. The only specialized credit that can be claimed is the Earned Income Tax Credit and persons who have received advanced EITC payments should use a different form. The incomes that can be reported are limited to the following: wages, salaries, tips that are included in the W-2’s box 5 or 7, unemployment compensation, taxable scholarship or fellowship grants, Alaska Permanent Fund dividends, and taxable interest up to $1500. While it may seem somewhat limiting, the 1040EZ is the easiest way for a qualified person who wants to use the standard deductions to file taxes.

Property is assessed by determining property costs in any given area. Property is valued by studying: the current sale price of properties in the area, costs to be incurred to replace the property, potential realization of property if it is rented, sold, or gifted, and the historical value of a property.

There are a few ways in which you could save on taxes:

1. Check if the state you reside in is offering any rebates. For example, a money back rebate, energy rebate, capping of taxes, or home owners rebate where under certain conditions you may be eligible to claim a rebate.

2. Ensure that the property is assessed right. This will ensure that you do not have to pay excess taxes. Assert your right to check you assessment report ensure that there are no miscalculations, mistakes, or assumptions. If in any doubt, do put in an appeal. According to statistics almost 50% of the cases win some relief.

3. Check all exemptions allowed according to the law.

4. Buy property jointly with a partner or family member. This way both owners become eligible for tax rebates.

5. Check if your assessment is in according to other properties in your neighborhood. Check with the assessment office or with your neighbors themselves. It helps to know applicable laws. Use the help of a real estate professional to put together a file of properties similar to yours that have a lower assessment. Or, use the bank’s appraisal to support your case. Be sure that the case you gather together is water tight.

6. Use a property consultant to help you save taxes. Some charge a flat fee while others just a percentage of what you save. A professional will check how assessment is done and also if there are any loop holes you can use.

7. There is strength in numbers. Get together with other owners who are also checking or fighting assessments. Check on the National Taxpayers Union Web site http://www.ntu.org for your rights.

8. Ask you home loan provider whether you are eligible for refund of property taxes paid. Some agreements have a provision for this. Many mortgages have automatic escrow of taxes.

9. Even before you buy a home find out what the property taxes are in the area and what have been the increases in tax rates.

10. Be sure to read through assessment and tax manuals published by your local authorities. These will give a clear idea of what are the parameters used and what you must do to reduce or pay the correct property taxes.

In order to be money smart you need to get the help of an efficient and dedicated accountant, plan your tax liabilities well, known thoroughly all aspects of Property Tax. If you are prudent, you can benefit by using ways and means to cut your tax burden and liabilities.