There's Still Time for 2011 Tax Relief

• Don't fear the home office deduction. In the past, many tax filers didn't claim a home office deduction because it was seen as an IRS red flag. But the requirements and forms have been clarified so people can do that properly – and not make mistakes that can lead to an audit. Also, the rules have been expanded so more people can claim the deduction. If you use a home office exclusively for business, even if you don't meet your clients there, you're eligible. For instance, a handyman who does his work other people's houses can claim the deduction if he does his paperwork at his home office. Another change is that, in the past, if you claimed 10 percent of your home as an office, that amount would not be included in the $250,000 tax-free profit from the home's sale that's allowed for an individual by the IRS. Be sure to make your claim reasonable, or it will get questioned; a $25,000 home office deduction for a business with $50,000 annual gross revenue is not reasonable.

• Maximize your Flexible Spending Account. The Health Care Act will limit the maximum you can put into these pre-tax medical expense accounts in 2013. So 2012 is the last year to use an FSA to pay for orthodontics and other large medical expenses using pre-tax earnings. A medical expense flexible spending account, or FSA, allows you to use before-tax earnings to pay for medical or health care expenses not covered by your health insurance. Assuming a 25 percent tax rate, you avoid $25 in taxes for every $100 you spend from your FSA.

• Need to sell an investment? Next year may be the time. The Tax Relief Act maintains the tax rate cap on capital gains and dividends at 15 percent through 2012. In 2013, the cap for capital gains will increase to 20 percent and for dividends, 39.6 percent. The Health Care Act also created a 3.8 percent Medicare tax on investment income, effective in 2013. Given those scheduled increases, plan to take advantage of the rates next year.