10 Sure-Fire Tax Breaks

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  Before You File Your Taxes ...

  Are you going cross-eyed trying to figure out which tax breaks you can -- and should -- take this year? If so, you're not alone. Since 1986, lawmakers have made roughly 15,000 changes to the tax code. So there are always new tax breaks, expiring ones and little-known or confusing ones to consider each tax season.
  
  Click through our gallery as we take a look at this year's 10 deductions and credits you don't want to miss.
  
  
  First Up: Tax Break No. 1

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  Break No. 1: Mortgage Insurance Premiums

  If you itemize your deductions and pay for mortgage insurance, for the first time you will be allowed to deduct your premiums on your 2007 return in addition to any mortgage interest you pay. The one catch: your mortgage insurance policy must have gone into effect after Dec. 31, 2006. The deduction is also subject to income limitations.
  
  
  Next: Tax Break No. 2

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  Break No. 2:
  Mortgage Debt Forgiveness

  If your lender forgave some of your mortgage debt on your principal home last year, you no longer have to pay income tax on that cancelled debt as you would have had to in prior years.
  
  You will have to fill out and attach IRS Form 982 to your return to get this new tax break, which is subject to some limitations on loan size and income.
  
  Next: Tax Break No. 3

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  Break No. 3:
  One-Time Stimulus Rebate

  With the exception of high-income taxpayers, most tax filers will receive a one-time tax rebate this year. All you need to do to get yours is file a 2007 federal income tax return and report a minimum of $3,000 in qualifying income. Beyond that, the IRS will figure out how much of a rebate you should get.
  
  Here's a breakdown of what you need to know about how the rebates will work and who is eligible.
  
  Next: Tax Break No. 4

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  Break No. 4:
  State and Local Sales Tax

  If you itemize your deductions, you may deduct either the state and local income tax you paid in 2007 or the amount you paid in state and local sales tax. Deducting sales tax is the clear choice for those in New Hampshire and Tennessee whose income is based primarily on a paycheck, because those states don't tax wage income. But they do impose tax on interest and dividend income, so if that's your primary source of income, the choice may not be as clear.
  
  Next: Tax Break No. 5

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• American dollar notes and a diploma with ribbon

  Break No. 5:
  Tuition and Related Expenses

  Whether or not you itemize your deductions, you may deduct qualified higher education expenses. You may take the deduction on up to $4,000 in tuition and fees if your adjusted gross income is $65,000 or less ($130,000 for joint filers). If your AGI is higher ($80,000 or less for single filers; $160,000 or less for married couples), you may deduct up to $2,000.
  
  You'll need to fill out and attach to your return IRS Form 8917, and enter the tuition deduction on line 34 of the 1040.
  Next: Tax Break No. 6

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• Appliances in a store showroom

  Break No. 6:
  Energy-Efficient Appliances

  Making your home more energy efficient can really pay off. You can take a 30% credit on up to $2,000 for the cost of a solar water heater and up to $2,000 for the cost of photovoltaic equipment.
  
  You also can get a 10% credit on up to $500 for insulation and heat-reducing metal roofs, including up to $200 for energy-efficient windows.
  
  Next: Tax Break No. 7

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• Fast food employee

  Break No. 7: Claim Your Rightful Dependents

  Just because your child is 18 or older and earning a paycheck doesn't necessarily mean you can't claim her as a dependent. If you support your child, step-child, sibling or step sibling you're on the way to being able to claim them as a dependent and get a $3,400 per child exemption against your taxable income.
  
  For more information, see IRS Publication 501.
  
  Next: Tax Break No. 8

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• Boys playing on jungle gym

  Break No. 8: Child Care

  If you work full-time and pay for the care of a dependent you may be able to get a credit for what you spend above the expenses covered by your tax-deductible flexible-spending plan at work. Depending on your income, you're entitled to a 20% to 35% credit on up to $3,000 in expenses for one dependent or $6,000 for two or more.
  
  For more information, see IRS Form 2441 or IRS Publication 503. The credit is entered on line 47 on the 1040.
  
  Next: Tax Break No. 9

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• Computer screen

  Break No. 9:
  Last-Minute IRA Deduction

  You have until April 15 to make your 2007 contribution to an individual retirement account.
  
  To qualify for a deductible IRA, you may not be covered by a retirement plan at work or, if you are, your modified adjusted gross income (AGI) must be under $62,000 ($103,000 if you're filing jointly). The 2007 contribution limit is $4,000, plus an additional $1,000 if you're 50 and older.
  
  Next: Tax Break No. 10

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• Hands holding piggy bank

  Break No. 10: Saver's Credit

  Saving for retirement can result in a lower tax bill in more ways than one. If your AGI is $26,000 or less ($52,000 or less for married couples), you may take up to a 50% credit on up to $2,000 in contributions made to qualified retirement savings plans, such as 401(k)s, 403(b)s and traditional and Roth IRAs. The closer you are to the income ceilings, the lower your credit will be.
  
  For more information on the saver's credit, see IRS Form 8880. The credit is entered on line 53 on the 1040.
  
  Next: Most Common Tax Scams

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• IRS building

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  Most Common Tax Scams

  The IRS recently unveiled the 12 most common tax schemes and scams affecting American taxpayers in 2008.
  
  This year's list is highlighted by Internet phishing scams and several new frivolous tax arguments.
  Click through our gallery to see the "Dirty Dozen" schemes that the IRS urges taxpayers to avoid.
  
  See the IRS Dirty Dozen
  
  Next: Wackiest Deductions

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• Surprised man with taxes

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  Wackiest Write-Offs

  Some tax deductions are questionable. Others are illegal. And then there are those that are just plain weird.
  
  Every year, Bankrate catalogues the 10 craziest new write-off tales CPA's have heard. Past years have featured everything from sperm donations to tricked-out Amish buggies. Click through our gallery to see the creative and sometimes audacious ways your fellow taxpayers have tried to save on their returns. Craziest Tax Deductions
  
  Next: Biggest Tax Procrastinators

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  Biggest Tax Procrastinators
  
  Residents of these cities are in no rush to file their tax returns according to TurboTax. The online tax service tallied returns filed between April 14 and April 17, 2007, and these 10 cities had the most number of returns filed during that last-minute time period.
  
  Is your city one of the biggest tax procrastinators? Click through the gallery and find out.
  See the Laziest Cities for Filing

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