How to Decrease Taxes for Middle Class Couples

For most people, paying taxes ranks right up there with root canals and cleaning out septic tanks -- necessary evils you’d like to avoid as much as possible. You have to pay taxes, but you don’t want to pay more than your fair share. Politicians talk a lot about the tax burden for the middle class, though the definition of middle class is highly variable. The U.S. Census Bureau reported the median household income in 2010 was $49,445. If middle class is defined as people who earn between 80 percent and 120 percent of this median, then the range falls between $39,556 and $59,334, but some have defined middle class as households that make less than $250,000 a year. Wherever you consider yourself in this spectrum, decreasing your taxes means more money in your pocket for savings, paying down debt or having fun. Actions you take now and throughout the year can decrease your taxes.

Take advantage of tax credits. Tax credits directly reduce the amount of tax you owe. Depending on your income and family situation, you may qualify for one or more of these credits. For instance, if you pay for child care for your child or if you provide care or support for an elderly relative, you may qualify for the Child and Dependent Care Credit. If you adopt a child, you're entitled to a tax credit. In the past, Congress has enacted tax credits for improving the energy efficiency of your home or for buying a first home. Search for other tax credits for which you qualify, which can vary from year to year, on the IRS website, when you fill out your taxes.

Maximize tax-deductible savings. Saving for retirement, for your kid’s college education and for future health expenses can also help reduce your taxes. The money you contribute to an IRA, 401(k) or other qualified retirement plan is deducted from your paycheck pre-tax. If you establish a 529 plan to save for your child’s education, that money is contributed pre-tax as well. Also, if you have a high-deductible health insurance plan, money you put into a Health Savings Account (HSA) to pay medical expenses not covered by your insurance also isn’t taxed. Even if you don’t qualify to open an HSA, you may be able to open a Flexible Spending Account with your employer, which takes money out of your paycheck before taxes and puts it into an account you can use to pay for such expenses as eyeglasses and dental visits.

Make the most of other deductions. If you itemize deductions, every additional deduction helps reduce your taxable income. Increasing your charitable giving creates a useful deduction. If you don’t have money to give, look for other items you can donate, such as clothing, household goods or even an old car. Items must be in reasonably good condition, and you should document the donation and obtain a receipt. Organizations such as Goodwill publish guides to help you place a value on your donation. Other deductions you might be able to take include sales tax, most useful if you live in a state that doesn’t have a state income tax, since you must choose between deducting sales tax and deducting state income tax on your federal return; job hunting costs, if you’ve been unemployed during the year; and points, if you refinanced your house. Be sure to keep receipts for all your deductions.