• IRS Form 1040 reveals numerous ways to reduce taxes.tax forms image by Stephen VanHorn from Fotolia.com
  
  There are two ways to reduce taxes---lower income or increase tax deductions. Many taxpayers are not aware that the IRS Form 1040 is a laundry list of tax reductions. Taking advantage of the adjustments to gross income lowers a person's taxable income. Further deductions and exemptions are allowed before a final taxable income is figured and then even more reductions in the form of tax credits are applied to further lower a person's taxes.
  
  

Adjust Gross Income

• The area noted as "Adjusted Gross Income" on a Form 1040 lists the possible ways of reducing income before taxes are assessed. Educator expenses, IRA deductions and student loan interest deductions are common ways of reducing income. The self-employed use this portion of an income tax form to deduct self-employment taxes, health insurance and self-employed retirement plans. This is also the section of the 1040 where reservists, performing artists or government officials who are paid on a fee basis can deduct certain business expenses, thereby reducing their income and their taxes.
  
  

Take All Deductions

• An individual can lower their final tax payment by taking the standard tax deduction listed on Form 1040 or by using Schedule A to itemize deductions and arrive at a total. To reduce taxes as much as possible, it is important to know which is greater---itemizing deductions on Schedule A or the standard tax deduction---and use the greater number to reduce taxes. For taxpayers paying a combination of out of pocket expenses for dental and medical care, out of pocket expenses in a work situation, or who donate large amounts of money to charities, Schedule A may provide a larger tax reduction.
  
  

Take All Credits

• Tax credits are applied to further reduce the final amount of tax paid and are applied after the tax has been figured. Available tax credits are listed on IRS Form 1040 starting at line 47. Included are education credits, foreign tax credit, child and dependent care credits and retirement savings contributions. The IRS Form 1040 includes a notation with each credit that identifies the separate IRS form that must be filled out and attached to the 1040 when taking the credit. Following the instruction manual for the 1040 helps the taxpayer figure out if they qualify for the credit. Tax credits can vary from year to year; checking at the beginning of every tax season to see what is available is advisable. In 2010, tax credits include a first-time home buyer credit and tax credits for energy-efficient purchases.