Reducing Income Taxes

by Charlotte Wood
(last updated February 21, 2009)

I liked it when I started working when I was sixteen because I was able to earn my own money and have it be just for me. My starting salary was $7.50 an hour and let me tell you I thought I was making it big. Apart from the fact that $7.50 is just above minimum wage, when I got my first paycheck and saw that a good portion of that paycheck went to taxes, I was sorely disappointed. The fact of life is that when you make money, the government taxes it and you don't usually get all you make. The trick to this system then is how to reduce your income taxes on your tax return and potentially get some of that money back.

The biggest way you can reduce your income tax is by itemizing your tax return. When you file your taxes beginning in January, you can file a form that calls for just a flat amount of your income, or a form that allows you to itemize your deductions. If you want to reduce your income tax, choose the latter. If your itemized items exceed the amount of a standard deduction, you'll definitely be reducing your income taxes.

Whatever tax form you use to file taxes, you automatically get a standard deduction amount, but you can increase that amount by itemizing your expenses. Before taking the time and energy however to itemize all your expenses for the previous year, make sure that you actually will benefit. You need to check if your itemizations exceed the standard deduction you receive anyway. Take the Schedule A to make a list of all your eligible expenses and then compare that figure with your standard automatic tax deduction. If the number is larger than the standard deduction then you're in luck and should proceed to file the itemized form. However, the number of allowable deductions is shrinking and so you'll have to keep tabs on what itemizations are allowed.

The biggest forms of tax deductions include:

  • State and local income taxes
  • Real estate taxes
  • State and local personal property taxes
  • Mortgage interest
  • Charitable contributions
  • Medical expenses as long as it exceeds 7.5% of your adjusted income

Reducing your taxes isn't impossible, it just takes time and the ability to see where you can loop the system. Itemizing your taxes is a great way to reduce your income taxes and maximize your tax returns. Good luck!

Author Bio

Charlotte Wood


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