Steps Toward a Happier Return

1. And Baby Makes How Many?

First, add Baby to your exemptions -- but make sure you've gotten Baby a Social Security number. That's required for all dependents. If you haven't already, apply to the Social Security Administration right away. The process usually takes about two weeks. If you don't have the number by the April 15 tax deadline, you can obtain an extension by filing Form 4868 with the IRS.

The child tax credit available to many parents is now as much as $1,000 per child. It starts phasing out for couples with i ncome of or more than $110,000 and of or more than $75,000 for singles.

2. Fund, Fund, Fund

Check the 1099 from your mutual fund carefully (for that matter, carefully check any 1099 from an individual stock) and be sure you differentiate ordinary dividends from qualified dividends on your Form 1040. "Qualified dividends," if you have some, will qualify for the 15 percent tax rate.

3. Home Buyer Alert

Points, the upfront amount you may have paid to obtain the mortgage on your principal residence, are deductible. Points masquerading as loan origination fees, maximum loan charges, loan discount and discount points are also deductible. (Points paid on a loan secured by a second residence cannot be deducted in the year of purchase but must be deducted over the life of the loan.)

Speaking of which, points for a refinance must be amortized over the life of the loan. But homeowners who retired that mortgage to refinance yet again may now deduct the remainder of any points paid to obtain the first refinance.

This is counterintuitive, but points paid by the seller are deductible by you, the buyer.

4. Home Again

Property taxes are deductible for filers who itemize. But municipal and county fees for trash collection and sewer service are not deductible -- even though many times they are added to your real estate tax bill. Homeowner association dues aren't deductible either.

Late fees added to your mortgage bill are already included in the amount the lender reports that you paid during the year. Do not add them on top of the number on the 1099.

FHA mortgage insurance premiums and private mortgage insurance (the dreaded PMI) are not deductible.

When going through receipts from past years, collect and save those that represent major additions and improvements to your house. The expenses are not tax-deductible per se, but you can add them to your cost "basis" when you sell. That means your capital gain will be smaller, which could keep you below the tax-free maximums of $250,000 for an individual and $500,000 for a married couple filing jointly.

5. States' Rights

You must report your state or local tax refund from 2004 as income in 2005 -- but only if you itemized deductions in 2004. If you simply took the standard deduction that year, do not report the refund.

6. The Name Game

If a newlywed takes a new name and doesn't tell the Social Security Administration, IRS computers will not be able to match the new name on the tax return with the Social Security numbers. Getting divorced and discarding the name? You could run into the same problem.

7. Over the Threshold

In general, married couples are better off filing jointly than separately because of the less favorable brackets for "married filing separately." But there are exceptions. For example, medical expenses are deductible only to the extent they exceed 7.5 percent of adjusted gross income, a tough hurdle to get over for most couples. But if one spouse has been very sick and racked up very large medical expenses not covered by insurance, it may pay to file separately because those expenses may be high enough to top 7.5 percent of that spouse's income and thus generate a deduction. You may need to do your return both ways, though, to be sure which filing form is better.

8. Attention, Military Personnel

Soldiers, sailors and Air Force personnel are eligible for a variety of benefits. For example, military pay during service in a combat zone is excluded from income of enlisted personnel and, up to certain limits, for officers. There are also special rules that apply to the sale of a home, travel expenses and other items. Active-duty officers and enlisted people -- or their spouses who may be back home trying to do their tax returns -- should look at IRS Publication 3, "Armed Forces Tax Guide." It's on the IRS Web site at http://www.irs.gov/ .