Here are some common tax tips designed to save you taxes legally:
Job search or job move: Those itemizing on their tax returns can use out of pocket interviewing costs and moving expensesto reduce their tax bill. For the later, you must at least 50 miles to take a new job.
Donations: You can donate clothes, computers, cars and stock and other investments to IRS-approved charitable organizations and get a deduction on Schedule-A. With clothes, list them with fair values and have charities sign the list. In the case of a car, the value depends on whether the charity sells or keeps it. For people with stocks, mutual funds and other investments that have soared in value, give shares directly to charity and get the full value as a deduction.
Last-minute income reduction: Many valuable credits depend on making sure your income isn't above a certain level. Therefore, if you have a bonus coming in December, ask that it come in January. If you are self employed, you can bill a client late in December, so the payment arrives in January. Wait to sell stocks or bonds that have gained in the ensuing year, or sell another in current year if the investment will result in a loss.
IRA and/or 401(k): The easiest way to cut income is to stash more money into your 401(k), tax-deductible IRA or open a 401(k) or SEP IRA for a small business. Maximum 401(k) contributions are $17,500, or $23,000 if over 50.
Get help with college costs: If you or your kids are in college, pay tuition and fees this year to get the maximum credit of $2,500. If you've maximized the credit this year, wait until next year, if you can, to pay college bills so you can get the $2,500 maximum next year. For adults taking extra classes, use the Lifetime Learning Credit to get a benefit of up to $2,000. Still saving for college? You may get a deduction on your state income taxes if you contribute to a 529 college savings plan in your state.
Medical expenses: These must be more than total 10 percent of your adjusted gross income, or 7.5 percent if you are over 65 to provide any tax benefit. However, if you are self-employed, you can deduct full cost of health insurance premiums provided you have earned income.
Home office: You can deduct provided the office supports an income producing activity and is used regularly and exclusively for business.