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17 Legal Secrets to Cutting Your Tax Bill

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american irs internal revenue...
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By Barbara Friedberg

Around the time I stopped fighting with my parents and began listening to them, my dad imparted some brilliant financial advice. He told me to become a scholar of the tax law. OK, perhaps he didn't use those exact words, but the message was the same: Know the tax law and take every tax deduction to which you are entitled.

This advice stuck with me, and I'm certain it has saved me thousands of dollars.

The Internal Revenue Service website offers excellent resources to help you further understand the following tax deductions and credits. Study the credits particularly well, as those benefits reduce your taxes dollar by dollar. In other words, if you owe $1,000 in taxes and receive a $150 tax credit, your taxes owed decrease to $850. That's an extra $150 in your pocket.

By spending a few hours each year keeping abreast of the tax law, you can save thousands on taxes over the years. In fact, keeping a tax reduction mindset in your everyday life will serve your finances well.



Do not count on a tax preparer to know every deduction for which you are eligible. Be a smart consumer and know the tax benefits you can claim. Every additional deduction you claim increases your disposable income.

Barbara Friedberg, MBA, M.S., is a portfolio manager, consultant, website CEO and author of "How to Get Rich; Wealth Building Guide for the Financially Illiterate." Learn more about investing and retirement at Barbara Friedberg Personal Finance.

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What Are the Tax Penalties for Smokers?

Starting in 2014, the Individual Shared Responsibility provision of the Affordable Care Act made you responsible for having minimum essential coverage, or MEC, in health insurance. Otherwise, you need to be eligible for a health care exemption, or you could pay a penalty when filing your income tax return. This requirement for minimum essential coverage applies to smokers and nonsmokers alike. If you're not covered by an employer's health plan and are a smoker, you can go to the health care marketplace to find MEC. If you're still unable to comply, you may have a penalty applied.

5 Steps to Navigate the Healthcare Marketplaces

To navigate the Health Insurance Marketplace, you have to know what you want from a health plan. Have your previous plan handy to make comparisons, as well as household and income information. If this is your first health plan, be aware of your needs and know your tax situation. Eligibility depends on the size of your family and combined income from all sources.

What Is Form 8941: Credit for Small Employer Health Insurance Premiums

Small business owners who subsidize the cost of employee health insurance premiums may be able to get some of that money back by claiming the credit for small employer health insurance premiums on their taxes. Some of the eligibility requirements, however, limit the number of people a business can employ and the average annual wages they earn. Qualifying as a small employer can reduce your tax bill by the amount of the credit you report on Form 8941.

What Is Form 8911: Alternative Fuel Vehicle Refueling Property Credit

In light of rising gasoline prices and environmental concerns, consumers have become more receptive to buying cars and trucks that run on types of fuel other than gasoline. The U.S. government introduced a tax incentive to encourage the installation of facilities to store or dispense alternative fuels in 1992. That incentive has evolved into a tax credit that also applies to equipment that recharges electric cars. If you equipped your home or business to accommodate alternative fuel vehicles, you may be able to use Form 8911: Alternative Fuel Vehicle Refueling Property Credit to reduce your federal tax obligation.

What Is Form 8885: Health Coverage Tax Credit

The health coverage tax credit is a program in place for tax years from 2002 to 2013 to help eligible individuals and families by paying a portion of premiums for qualified health insurance programs. Since the legislation authorizing the credit expired in January 2014, tax returns filed in 2014 for the 2013 tax year represent the last time eligible taxpayers can claim the credit.

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ga7smi

do what the rich do - cheat

March 15 2014 at 2:19 AM Report abuse rate up rate down Reply
Virg.

$$-$$$=0

March 14 2014 at 10:56 PM Report abuse rate up rate down Reply
Smurfs Rule

If anyone thinks the IRS had and still has complete control of U.S. citizens, you are right! The IRS has always terrorized hard working decent Ameicans for the simplist errors while allowing big government executives and multimillionairs to slip through the cracks(our recent former Secretary of Treasurery for example). When it comes to all the free advise on how to avoid using a CPA, one should be aware of all the trickery injected into the tax system since ObamaScare was shoved down Americans throats. Even a highly educated and duty bound CPA has mammoth work loads trying to read and follow rediculous regulations and munitia, especially since 2008. If the above mentioned law has approximately 2,800 pages, most likely 1,000 covers massive changes to the tax code. I wouldn't attempt it even if a freeloader.
Good luck if you try!

March 14 2014 at 9:00 PM Report abuse -1 rate up rate down Reply
pkellycpa

These articles always omit the limitations on those who can use them.
Home office? Not if it's for your conveniance instead required by your employer.
Mileage, sure, but it's a miscellaneous deduction, which must exceed 2% of your income.
Convince me that you went to Disney World for business reasons.

We spend more time preparing returns than the author spent preparing this article.
We do know our stuff.

Who does your return, Barbara?

March 14 2014 at 7:07 PM Report abuse rate up rate down Reply
Joni Alexander

Why the heck would I allow my adult child to deduct the interest on her loans that I co-signed and I made the payments on in 2013? $2800.00 in capitalized interest! I'm taking that maximum deduction of $2500.00!

March 14 2014 at 5:41 PM Report abuse rate up rate down Reply
1 reply to Joni Alexander's comment
ljhanaway

Because many parents exceed income for claiming the interest on their own return, even for some recent graduates the amount is phased out. However, in most cases the adult child will be able to claim a portion of the interest.

March 14 2014 at 9:33 PM Report abuse rate up rate down Reply
hondabuck

Tax tip 9: third line: "for all for years of collage...should be"all four years"... nice work proofreaders!

March 14 2014 at 5:12 PM Report abuse rate up rate down Reply
clyogi

Where are the secrets? All of the items shown here are pretty well known.

March 14 2014 at 2:28 PM Report abuse rate up rate down Reply
Max Lilly

Death and Taxes, read my lips "no new taxes", live longer and longer if you can follow some basic guidelines

March 14 2014 at 2:28 PM Report abuse -1 rate up rate down Reply
antiqueanna

If audited say you want the Lois Lerner Law applied and claim the 5th.

March 14 2014 at 11:55 AM Report abuse rate up rate down Reply
pburoran

REPEAL THE 16TH AMENDMENT!!!!

March 14 2014 at 10:55 AM Report abuse rate up rate down Reply