My husband and I both work full time. We have a son who is almost 2 and another one due to arrive very soon. We make just enough money that it seems we never get any breaks. The one thing that has changed for us over the last few years is that we owe much less in federal and state income taxes. Here are our favorite ways to save on the dreaded tax bill.
1) Mortgage interest and property taxes: These are two of our major bills each month. Both of these things are tax deductible and just these two things make itemizing worth it! Result: $14,000 deduction.
2) Go back to school: 2012 is the last year of the American Opportunity Credit. If you or your spouse does not have a 4 year degree, now is the time to work towards one. My husbands tuition bill for 2011 was $4,300. That earned us a tax credit of $2500. That is $2500 off our tax bill.
3) Charitable Contributions: If you itemize, those items you donate to Goodwill or other charities can really add up. You need to get a receipt when you drop off your items as well as creating a list and estimated value of he items you donate. Goodwill has estimated values listed directly on their website. It took me about 40 minutes to create the list and estimated values as I was getting my things for goodwill together. Result: $435 deduction
4) Childcare Credit: Childcare is expensive. Get up to a 35% tax credit for childcare expenses.
Result: $800 credit.
5) Open a 529 college savings plan for your child: It only takes $25 to get one started, and you get 10% of your contributions "back" in the form of a credit on your tax bill. (varies by state) Result: $100 credit on our state taxes.