How to Pay Less Federal Income Tax

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How to Pay Less Federal Income Tax. The simplest way to reduce your federal income tax is to increase your tax deductions. Here are some tips for legally trimming your next tax bill.

Obtain a copy of the instructions for Form 1040, Schedule A. You can pick up a copy at your local library or post office. Form 1040, Schedule A is used to itemize deductions.

Go through the instructions for Form 1040, Schedule A. List all possible deductions for which you qualify. The instruction booklet includes qualifications and details the upper limits on amounts you can deduct for each item.

Calculate your total itemized deductions. If the amount is more than your standard deduction, file with itemized deductions. If it is less, use the standard deduction.

Increase your deductions as much as possible. You can deduct business expenses, as well as charitable gifts and interest paid on your home or student loans. You can create a home business to increase your deductions. You also can give larger gifts to charities.

Contact a tax preparation professional if you cannot reduce your federal income tax to your satisfaction. He may be able to help you take advantage of little-known deductions. However, you may save less on your taxes than you end up owing your tax preparer.

Tips & Warnings

  • Most taxpayers use the standard deduction because they are not sure how to itemize their deductions. However, it is only slightly harder to fill out the Form 1040, Schedule A, and you are likely to have a higher deduction.
  • If you contribute to the support of individuals who don't qualify as dependents, you may be able to write off some related expenses, such as medical care.
  • Watch out for deduction limits. There are caps on the amount you can deduct from your federal income tax, depending on your annual income. Limits are included in the instructions for Form 1040, Schedule A. They start at around $75,000 for single taxpayers and $150,500 for those filing jointly.

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