If your child is expected to earn only moderate amounts of investment income, little if any tax is likely to be owed on the bond s interest annually. If you made a partial redemption of shares in a mutual fund last year, you may be able to take advantage of an alternative formula, known as average cost, to minimize the capital gains tax bite. Averaging can be helpful if you bought your shares over time at different prices and didn t instruct your fund which specific shares you wanted to redeem. When writing off business use of a car, basing the deduction on your actual expenses will often yield the biggest deduction. But in some cases, claiming the IRS fixed mileage rate will be the more lucrative option.
Farmers have the option of using a favorable income-averaging formula for calculating their taxes.
The averaging method can help many farmers trim their tax bills by thousands of dollars. But don t assume that income-averaging is always the best option. Some farmers will pay less tax by using the regular tax calculation. Married couples have a choice when it comes to filing status. Couples will find they ll usually pay less tax by filing joint returns rather than separate returns.