The Glory of the Red, White, Blue and Green

The civic holiday commemorating Independence Day, falls on a Saturday this year. But where will you be on the 4th of July?

On this day, there are always an infinite number of possible places to go, things to do, people to see, great food to eat, baseball games to watch, and fireworks to cheer over (or under, as the case may be.) Above all else, the 4^th of July is a birthday. It is a day to celebrate our nations birth, the American way of life and to give thanks for the many blessings of living in these United States; the land of the free and the home of the brave.

Although we may spend many other days of the year complaining, criticizing and badgering the government about how they are taxing us to death, shouting catchy slogans such as, ”Taxed Enough Already” and “Let’s Fight For Fair Taxes,” the fourth of July is not a day for crying about taxation. After all, there’s no crying on Independence Day!

As you proudly dress yourself, your car, and maybe even your pet in red, white and blue this holiday, remember that the green in your pocket still goes a long way. Despite the fact that Uncle Sam routinely helps himself to a sizeable chunk of your greenbacks on April 15^th each year, there are many tax-friendly deductions you can capitalize on during the year, in your quest for the American Dream.

For starters, the government allows for a whole range of deductions that help to reduce your overall taxable liability. The result is, less taxable income which equals less tax, which leaves more of your hard earned cash remaining where you want it; in your pocket!

Deductions

The following are just a few of the many deductions that can reduce your taxable earnings and get you off on the right foot:

1. The best strategy for reducing your taxable income is to itemize your deductions! Deduct your mortgage interest, points, personal property taxes, state and local taxes, gifts to charity, job-related expenses, tax preparation fees, health care, and investment-related expenses.

2. Take advantage of the $3,000 per child credit for child and dependent care.
3. Open a 529 plan or a Coverdell, and save for your child’s future education. You can deduct as much as $2,500 in interest each and every year, while they are growing.
4. Save for retirement through a 401(k) at work.
5. Open an Individual Retirement Account, (IRA).

Consult with your tax professional to get the most out of these income lowering vehicles and many other things you can deduct.

Credits

Once you’ve exercised all avenues in reducing your taxable income, you are ready to take advantage of the various tax credits. Instead of reducing your taxable income, credits reduce your tax. There are tax credits for college expenses, for saving for retirement and even for adopting children.

1. The Hope Credit is available for up to $1,800 for students in their first two years of college.
2. The Lifetime Learning Credit is for anyone taking college classes. The classes do not have to be related to your career.
3. Depending on your tax bracket, the Earned Income Credit can generate a tax refund even if you bring your taxable income down to zero.
4. The Child Tax Credit is a $1,000 per child credit designed to lessen the impact of income taxes for families raising children.
5. A First-time Homebuyer’s Credit of up to $8000 is available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009.

All of these tax advantages and more, are available to you and with a little research and the assistance of a qualified professional, you can help yourself down the road to financial independence. By utilizing our tax system to the maximum, you will be living up to the vision that our forefather’s held when they stated, … all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

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