Self Employed? Then Save Money on These Common Tax Breaks

• Car Mileage
• Business travel expenses. (Sorry, the trip to Barbados with the family cannot be a tax break.)
• Per Diem - this falls under the business travel expense category, but often gets overlooked.
• Office Expenses, including separate phone lines, maintenance and supply fees, any contract or payroll costs, and any tax fees.

Tax breaks are malleable beasts. They morph from one year to the next, becoming tamer or more feral depending on the situation (your tax bracket). Federal tax deductions, like for mileage per gallon deductions, fluctuate in accordance with the average cost of gasoline throughout the year. As you can imagine, the tax deduction has increased steadily over the past few years. The 2007 rate for business miles traveled rose to 48.5 cents a mile. Per diem rates also increase or decrease depending on which area you visit for business. The current per diem rate table appears in the IRS publication 1542.

How about Investing the Money rather than Paying Taxes on It?

Did you can reduce your taxable income by investing in a qualified IRA or 401(k)? You can invest up to $5,000 dollars in an IRA up to the April 15, 2008 tax due date. This common tax break allows for you to invest the money in a fund without paying taxes now. Assuming you made more than $5,000 this year, and not more than $180,000, then you can contribute. There are other rules, of course. This tax break limitations also hinge on whether you are offered a retirement plan through your employer. To see a full list of this tax break's offerings visit the tax law change page on the IRS site.

Your Loss Can Be Your Gain

Did you play the stock market last year, sinking money into the mortgage lenders early on in the year, only to realize that everything was going down, down, down? You may have come away with a loss, but you can take that loss and write off the gains as well. Losses that exceed the capital gains for the year can be written off of up to $1,500 in income (or $3,000 if filing jointly). If you lost more than the $1,500 then you can carry over those losses to the following year, until the loss has been accounted for in future tax filings. The loss in the stock market can help reduce your tax burden and essentially creates a federal tax break.

Cash in on Tax Credits

The best federal tax break comes dollar for dollar in what is called a tax credit. So for specific things, like energy choices you made throughout 2007 you can reduce your tax owed by each dollar you spent.  Unfortunately, the Energy Tax Incentives Act only ran through 2006, so the windows you added to your home cannot be deducted on this year's taxes. However, the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and some limited Energy Tax Credits do exist for this year's tax filings. These types of federal tax breaks equate to more money on your returns, sometimes by the thousands, depending on your tax situations.

Building a Knowledge Base

In the world of taxes, nothing is constant. The laws change rapidly, sometimes just before the printing of the 1040s. With the ink barely dry on a bill in Congress, tax information becomes printed. For this reason, it is sometimes painfully important to consult tax information online before beginning the filing process. While it has become easier to file taxes online, many still do the task the old fashioned way, with pen and paper. The biggest tax break can be not making mistakes and filing correctly the first time.

We do have some great partners who offer exciting software and information regarding taxes. Please, take a look at their offerings and see if they can help ease you into the tax year.

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