Well, tax season is about to start. Like always (since 2002) I did my return in TurboTax this year. The product seems to improve each year, but there are still a lot of usability problems. Sometimes "back" doesn't really go back etc. Either way, I like doing my taxes and I find that with the new autodownload capabilities for W2s and 1099, data entry mistakes are greatly minimized. Sadly Microsoft doesn't participate in the W2 download feature (although they did 3 tax returns ago).
Anyway, my taxes were especially complicated this year. Mainly because we sold our condo in San Francisco and we had some extra paperwork. Lora also rolled over two accounts since she switched jobs. Anyway, it still took me about 4 hours to complete the whole return minus the charitable contributions stuff that I need to collect my receipts for. Oh, and as usual calculating ESPP tax liability was a breeze thanks to my handy dandy excel spreadsheet (drop me an email if you want it).
Anyway, this year I qualified for a few tax credits. IMHO These things are silly and represent how screwed up our tax code is.
Foreign tax credit
I owned some overseas fund and had to pay $78.55 in foreign taxes. I had no idea really as my broker took care of this. But lo and behold TurboTax tells me I qualify for a $79 tax credit. I have no idea why, nor do I care.
Energy Tax Credit
In doing our remodel of the kitchen this year, I got a credit for the insulation and the windows & skylight we put in in the name of energy efficiency. I have no idea why. I imagine this tax credits are supposed to incent you to pick energy efficient items when doing repairs/remodels etc. But I only knew about this because TurboTax asked me about them. No accountant would have done this unless they knew we did a remodel... and if they did they would need to know to ask if we had any insulation or windows replaced.
Anyway, I get $322 off my tax bill for spending $3,216 on windows and insulation.
Telephone Tax Credit
The government stopped requiring that phone companies collect some arcane tax from us decades late, so we can either estimate how much we get back by pouring through phone records I no longer have, or I can take $50 off my tax bill.
AMT
For the 3rd year in a row I get to pay the Alternative Minimum Tax (AMT). Lucky me. Because I live in California and pay high state taxes, have a wife (and child), and own a house (that has a huge mortgage) I fall into a category of Americans that is subject to a tax that was put into place by a bunch of morons that did not index the thing to inflation. This means that I am paying taxes based on income limits from 1969 that was meant to target 159 households.
Well, here is how the AMT works. You get a mortgage deduction, and you can deduct charitable contributions. But you cannot deduct property or state taxes from your AGI.
This year the AMT is expected to catch over 20 million people (today less than 4 million households pay it). It will continue to rise and rise till a lot more people are paying it. Each year congress passes a bill at the very end of the year that gives people some amount of AMT relief but has not offered a permanent fix. The problem you see, is that our current 2.5 trillion dollar budget includes AMT revenue for the foreseeable future. Nuking the AMT will only make our budget deficit worse.
"But now, due to inflation coupled with administration tax policies, the AMT is hitting millions of ordinary families, many earning well under $100,000 a year. Within five years, 37 percent of people earning between $50,000 and $75,000 and 73 percent of those with incomes between $75,000 and $100,000 will pay the AMT, compared with less than 3 percent three years ago. Nearly all families earning over $100,000 will pay it, according to a Brookings Institution study."
[Source: American Prospect Online]
The dirty little secret of the president bush tax cuts is that they won't matter anymore cause anyone that would benefit will likely be paying the higher AMT:
"Bush also assumes that Congress will make permanent his first-term tax cuts, which are set to expire in 2010. If the tax reductions were made permanent and the AMT were allowed to hit millions of Americans, the AMT would reclaim any benefits from the cuts for many taxpayers."
[Source: Mercury News]
The bad news for you is that if you are figuring your payroll withholdings using the regular tax and you fall into the same boat I am, you are underpaying your taxes and you will owe the government money. I figure out my tax liability for the year by just not including my property taxes or my state income taxes in my Federal AGI. That gets me within shooting distance of my REAL tax liability.
The only real way to get away from the AMT is to move to a different state with lower home prices and no state income tax (like Washington State). However, if I amortize the extra money that I pay for each sunny day we have, and each rainy day they have, I think California is worth the extra dough 
. Can you put a price on amazing weather?
Final Thoughts
In a way, I'm amazed at how much I can deduct from my taxes. Then again, I could not afford my house and my life if I just got by with the standard deduction. Not sure what that says about our tax system.
For the last 5 years though I have always managed to owe about 4% of my tax liability in Federal/State taxes. This is all thanks to using Microsoft Money to project my tax liability in real time so that I can adjust my witholdings 2 times a year. Since I itemize my paychecks money has an accurate forecast of what I am actually paying and what I will owe. I prefer to owe a small amount of money rather than get a refund.
Why? Cause you don't earn interest on the loan you are giving the government. As long as you don't owe more than 10% of your tax liability you won't pay a penalty. So if your federal tax liability is $20,000 you can have a payment of up to $2,000 without paying a penalty.