How to Get Tax Breaks

As of 2011, the U.S. tax code is approximately 75,000 pages long. However, there are a number of things that a taxpayer can do to take advantage of tax breaks without having to read the code front-to-back. Make sure you look through the relevant areas of the tax code to get the best idea of tax breaks as possible.http://www.law.cornell.edu/uscode/html/uscode26/usc_sup_01_26.html

Learning how to get tax breaks can be fairly easy if you plan in advance and keep good records. Following the steps below can help you discover some commonly overlooked tax breaks and perhaps make the tax season as painless as possible.http://www.irs.gov/taxpros/article/0,,id=98137,00.html

Step 1: Organize

Itemizing can often, but not always, save you money on your taxes. Make sure to calculate your taxes using the standard deduction amounts to see which one comes out best.http://www.irs.gov/taxtopics/tc500.html 

To make sure you can itemize effectively, you need to be able to look at your finances and see what you have done that might qualify you for a tax break. This includes business and work expenses, major purchases, and transfers of money to or from savings accounts, retirement accounts or investments. Keep your financial data (receipts, bank statements and other proofs of purchase) well-organized in a secure place.http://www.irs.gov/taxtopics/tc500.html

Step 2: Hire a Tax Professional

The tax code, which is hundreds of pages long and changes every year, is admittedly confusing. A financial planner or CPA can look at your books in the off season and help you to optimize your tax breaks. They may not prepare your taxes, but they can prepare you for the best tax situation possible.http://www.law.cornell.edu/uscode/html/uscode26/usc_sup_01_26.html

Step 3: Expenses

Home offices, work expenses, and expenses that teachers incur can usually be deducted to reduce your amount of taxable income. Education expenses, if you or a child are going to school, can also be counted in most cases.http://www.irs.gov/taxtopics/tc500.html

Step 4: Homeowner Tax Breaks

There are several breaks a homeowner can get for 2010. Many homeowners can deduct interest they pay on their mortgages, and people who are new homeowners or have not bought a home in more than three years can be eligible for a tax credit. Also, anyone whose house was foreclosed on will not need to count the debt they still owe on the loan as income.http://www.irs.gov/taxtopics/tc500.html

Step 5: Give to Charity

You can usually deduct any items that you gave to charity, or anything that you bought for a charitable purpose like an after school group. You can also deduct mileage expenses incurred driving to the charity work. Also, many state tax laws offer refunds for donating money to charity.http://www.irs.gov/taxtopics/tc500.html

Step 6: Pre-tax Spending Accounts

Pre-tax spending accounts for health care and college come out of your income before taxes. If you plan appropriately, you can save a lot of money by lowering your taxable income using a 529 Education Savings account or a Health Savings Account (HSA).http://www.irs.gov/taxtopics/tc500.html

Step 7: Use a Software Program

Software programs like TurboTax are set up with the latest tax laws embedded in them. When you are preparing your tax returns, they can help optimize your tax breaks by asking you questions about possible tax breaks you might not otherwise know about.http://turbotax.intuit.com/

Disclaimer: The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.

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