How Tax Savings Can Help Reduce Debt

The general sentiment among the vast majority of Americans is that we pay too much in taxes. In an age where many individuals are living from paycheck to paycheck it is particularly frustrating to see 15% (or more) of their money disappear before it's even in their hands. Although reducing the amount of taxes paid will not constitute a "fix all" solution (particularly for people who are not practicing fiscal responsibility) it will offer some much needed financial relief. These savings can be plugged into an individual's personal budget and assist them in meeting expenses, paying down debts and planning for the future. Now that we have an idea of the benefits that are at stake let us take a look at some tax saving suggestions.

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• Write off the interest paid on educational loans. In past years this could only be done for a maximum of 5 years but this limitation has been lifted. (1)
• Accumulate medical procedures into a single year. Some medical procedures are emergencies that must be addressed immediately; however, there are tax advantages if you accumulate a certain level of medical expenses in one calendar year.
• Deductions are available for those that drive alternative fuel vehicles.
• Take advantage of your IRAs and Roth IRAs. Both of these options offer significant tax advantages. Roth IRA's allow you to invest dollars on a pre tax basis.
• Deductions are available for job search expenses. These expenses include such things as the cost of resumes and relevant long distance telephone calls.
• Gather your tuition statements. Tax write offs are often available for educational tuition.
• Donate stock. Many charities will gladly accept stock donations which qualifies for a tax deduction.

Like it or not, taxes are here to stay and there is nothing you can do about it. However, there is something you can do to determine how much taxes you end up paying. It may take a little time to examine the government's criteria and to complete your returns but the results will be well worth the effort. The biggest challenge will be deciding what to do with the money you save.

(1) http://www.ntu.org/misc_items/TY02Taxtips.php3

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.