Young taxpayers should plan these moves throughout the year to reduce their taxable income and earn more tax deductions. Here are the areas where you should look for tax savings:

At work
Car and home
Family planning
Inheritance
Retirement savings

AT WORK

Give yourself a raise. The odds are high that you're having too much tax taken out of your paycheck every payday. The evidence is clear if you have a big refund coming. About 90 million of the returns filed last year called for refunds averaging more $2,200. Filing a new W-4 form with your employer (get one from your payroll office) will insure that you get more of your money when you earn it. See our easy-to-use withholding calculator to help you figure how many allowances you should claim. Suggest that your husband or wife do the same. Correcting your withholding can give you $200 more each month.

Switch to a Roth 401(K). If your employer offers the new breed of 401(k), seriously consider opting for it. Unlike the regular 401(k), you don't get a tax break when your money goes into a Roth, but younger workers are often in lower tax brackets ... so the break isn't so impressive anyway. Also unlike a regular 401(k), money coming out of a Roth 401(k) in retirement will be tax-free ... at a time you may well be in a higher bracket. More advice on the Roth 401(k).

Be smart if you're a teacher or aide. Keep receipts for what you spend out of pocket for books, supplies and other classroom materials. You can deduct up to $250 of such out-of-pocket expenses ... even if you don't itemize.

Keep track of the cost of moving to your first job. If the job is at least 50 miles away from your old home, you can deduct the cost of getting yourself and your possessions to the new location, including 20 cents a mile (in 2007) for driving your own car. You get this write-off even if you don't itemize deductions.

Take advantage of your flex account. Be aggressive if your employer offers a medical reimbursement account -- sometimes called a flex plan. It lets you divert part of your salary to an account, which you then tap to pay medical bills. The advantage? You avoid both income and Social Security tax on the money -- and that can save you 20% to 35% or more compared with spending after-tax money.

CAR AND HOME

Save that receipt. Be sure to hold onto the paperwork if you bought a new car in 2007. The law now allows taxpayers who itemize deductions to choose between deducting state income taxes or state sales taxes (this law is awaiting renewal for 2008 taxes). If you write off sales taxes, you can add the amount paid on your car to the amount the IRS sets for taxpayers with your income.

Buy a hybrid, take Uncle Sam for a ride. You can drive away with a tax credit if buy a gasoline/electric hybrid before December 31, 2010. The size of the credit depends on how fuel-stingy your new car is, but the tax savings can range from several hundred up to $3,400.

Use a Roth to save for your first home. Sure, the "R" in IRA stands for retirement, but a Roth IRA can be a powerful tool when you're saving for your first home. All contributions can come out of a Roth at any time, tax and penalty free. And, after the account has been opened for five years, up to $10,000 of earnings can be withdrawn tax and penalty free for the purchase of your first home. Assume $4,000 goes into a Roth each year for five years, and the account earns an average of 8% a year. At the end of five years, the Roth would hold about $25,350 -- all of which could be withdrawn tax and penalty free for a down payment.

FAMILY PLANNING

Deduct interest paid by Mom and Dad. Until recently, parents had a good reason not to help their children pay off student loans. If the parents were not liable for the debt, then no one got to deduct the interest. Now, however, when parents pay, it's treated as if they gave the money to the real debtor, who then paid off the loan. The child gets the tax deduction, as long as the parents can't claim him or her as a dependent, even if he or she doesn't itemize.

Time your wedding. If you're planning a wedding near year-end, put the romance aside for a moment to consider the tax consequences. The tax law still includes a "marriage penalty" that forces some pairs to pay more combined tax as a married couple than as singles. For others, tying the knot saves on taxes. Consider whether Uncle Sam would prefer a December or January ceremony.

INHERITANCE

Roll over an inherited 401(K). If you are named a beneficiary of a 401(k) plan, take advantage of a new rule that arrived in 2007. For the first time, non-spouses can roll over the account into an IRA and stretch payouts (and the tax bill on them) over your lifetime. This can be a tremendous advantage over the old rules that generally required such accounts be cashed out, and all taxes paid, within five years or fewer.

RETIREMENT SAVINGS

Make your IRA contributions sooner rather than later. The sooner your money is in the account, the sooner it begins to earn tax-deferred or, if you use a Roth IRA, tax-free returns. Over a long career, this can make an enormous difference.

Grab a 50% credit for saving. One of the most generous tax credits available effectively rebates up to 50% of what low-income workers sock away for retirement. If your income is below $25,000 on a single return or $50,000 on a joint return, you can get a credit of between 10% and 50% of up to $2,000 you stash in an IRA or company retirement plan. More on the Low- and Moderate-Income Tax Credit.

Deduct expenses even if you don't itemize. Taxpayers who claim the standard deduction often complain that itemizers get the better deal. But that's not true. The only reason to claim the no-questions-asked standard deduction is if it's bigger than the total of all the costs you could deduct if you itemized. And, you can deduct a lot of things even if you don't itemize, including student loan interest, certain expenses for reservists and performing artists, contributions to health savings accounts and contributions to IRAs. Keeping good records will save you money.

See All Tax Savings Strategies

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