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17 ways to save on your taxes

Leprechaun1_2 Happy St. Patrick's Day! To celebrate, here are 17 ways to save some green when it comes to your taxes.

1. Get organized. If you haven't started getting your tax materials in order yet, do it now. You've got less than a month until your 1040 is due and you don't want to have to take that Tuesday off just to get your taxes done. There are better ways to spend "sick" days! These checklists from Bankrate, TurboTax and H&R Block will help you get some filing control.

2. Pick your state tax deduction. Compare the state and local sales tax you paid last year to your state income taxes. Most people think the income tax will produce a larger deduction, but that might not be the case if you live in a state with a low income tax rate and are a world-class shopper.

3. Contribute to an IRA. You have until April 15 to put money in your IRA and have it count toward the 2007 tax year. If you choose a traditional IRA, you might get a deduction on your tax return. A Roth won't give you an immediate tax break, but you won't owe the IRS when you do start taking distributions.

4. Compare education tax breaks. Students (or those paying a student's expenses) have several tax-saving options, with the most popular being the above-the-line deductions for student loan interest and tuition and fees, and the Hope and Lifetime Learning credits. Look at each option and evaluate which produces the biggest tax break for your circumstances.

5. Count your casualty losses. If your home was damaged by flood, tornado, hurricane, wildfire or other natural disaster, you may be able to deduct amounts that your insurance didn't cover. But this tax break isn't limited to natural catastrophes. Losses due to thefts, burglaries, even auto accidents can be claimed as casualty losses if you meet the requirements.

6. Employ job-related write-offs. If you weren't reimbursed for out-of-pocket job expenses, you might be able to deduct them as an itemized expense. If you started looking for a new job (and why not if you're paying for your own office supplies!), those also are deductible. The only drawback is that you must have enough of these and other miscellaneous deductions to exceed 2 percent of your adjusted gross income.

7. Contribute more to your 401(k). If you're not putting in at least the percentage that your employer will match, you're missing out on lots of money. Check with your payroll/benefits administrator today about increasing your contribution.

8. Adjust your withholding. Don't use your payroll withholding as a forced savings account. You're letting the U.S. Treasury have free use of your money. Take back your cash. This online withholding calculator can help. Then put our extra dollars into a savings account or increase your 401(k) contribution so that the extra pay goes there.

9. Sign up for a flexible spending account. This probably will have to wait until your company's next benefits open enrollment season (unless you have a major life event, such as marriage, divorce or birth or adoption of a child), but in preparation you can start tracking your medical expenses. That way, you'll have a good idea of how much to contribute so you don't waste the money. Money $mart Life also has some ideas on FSA planning.

10. Count all your charitable contributions. You can deduct the value of goods as well as cash gifts you made last year. Just be sure you have the appropriate documentation.

11. Take credit for retirement savings. If you don't make a lot of money, you might be able to claim a tax break on your tax return this filing season for the IRA and 401(k) contributions you made. The Retirement Saver's Credit allows eligible taxpayers to get a credit for a portion of what you contribute to a qualified retirement plan.

12. Explore the earned income tax credit. This is another tax credit for lower-income folks, but one that is often overlooked. People tend to think it's just for filers with kids. They do get a larger EITC amount, but it's also available for single taxpayers, too. More here.

13. Turn your hobby into a business. You've been taking photos of special events for your friends and now and then, they slip you a few bucks for your efforts. That's taxable income, but you can reduce it by turning your avocation into a full-fledged business and writing off the associated expenses. And who knows, you might find a whole new career. That looks like it could be case for A Penny Closer's catering endeavor.

14. Deduct your private mortgage insurance. This is a tax break, like the EITC and Retirement Saver's Credit, that applies only to certain filers. But if you meet the requirements (more here), you can write off the premiums you paid in 2007 on the insurance policy your lender made you buy because you didn't put 20 percent down when you bought your house.

15. Make stock losses pay. No one ever likes to watch an asset lose value, but those losses could be valuable at tax time. You can offset capital gains with corresponding losses. And up to $3,000 in excess losses can be used to reduce your ordinary income amount.

16. Hire a tax pro. Many accountants might already be fully booked for the 2008 filing season, but if you find you're starting to panic about getting your return done, start making some calls now. In order to get the tax preparer you want, you might have to get a filing extension (and pay any taxes you owe) and then let that pro take care of your returns after the April 15 rush. The Happy Rock decided to shell out for professional help, and is glad he did.

17. File for your rebate. The federal stimulus package rebate checks will be mailed starting in May, but only to folks who file a 2007 return. That includes around 130 million filers who have to send in 1040s, as well as millions more retirees and lower-income workers who usually don't have to file. In all cases, to guarantee that you get your money, you've got to file a 1040 (or 1040A or 1040EZ). The IRS posts info and updates at its Economic Stimulus Payments Information Center.

Here's hoping that some of these tips will save you enough on your taxes to pay for your St. Paddy's celebration.

Leprechaun image courtesy of Until Then Graphics


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Saving Taxes

You can visit for a free tax calculator. It is quite sophisticated and can handle things such as bank interest, mortgage deductions, stock sales, AMT (alternate minimum tax). It can also be used for estimating the taxes that you need to pay to the IRS every quarter (if you fall into that category).

For additional questions you can also use a custom search engine available on the site which fine tuned for tax issues.

The Happy Rock

Nice list, and thanks for the link!

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