I’m not a financial tax wiz, but I feel your pain. We were repeatedly hit with owing more than we paid until we started taking deductions.
You can take $2000 per working individual and put 'em into IRAs. You can still do this for tax year 2000. This will lower your taxable income and save some bucks.
See a financial planner; sometimes banks will provide this service free of charge in order to get your investments. Don’t buy those financial planner books - generally their crap.
Secondly, Start your planning for 20001 now. There are some good cd instructions on tax preps which also show you were you can reduce your net taxable income for next year. There are also lists of average deductions for your income group. Charitable deductions average over $2,000 in your bracket.
Just make sure that the organization is recognized by the IRS as eligible: Planned Parenthood, PBS, medical research, social service programs. You can also feel good that you are giving much needed support to deserving agencies.
Third, buy that house and take the interest, points, tax deductions for next year. You can also take off on your second home mortgage. Have parents who might need assistance in paying off their mortgage? It’s the payor who
benefits just make sure that the majority of the money going for the mortgage is in interest and not principle. Generally the newer the mortgage the better in terms of tax deductions.
Fourth, get those teeth fixed, new glasses, stop smoking, etc. These are all deductible off your gross earnings minus whatever your insurance pays.
Plan for the future in terms of college education costs and your retirement [401(k)s, savings bonds which are used for education, municipal bonds… As for college education costs: see if you state has a prepaid plan which shifts the tax burden on the kids when they start drawing down the benefits [they’ll be in the pay no tax bracket at that time and will pay little if anything on the tuition plan].
You can reverse this situation if you start planning now.