8 Government Mandates That Save You Money

Photo (cc) by PedroCancion

When the Supreme Court recently upheld the Affordable Care Act, a majority of justices reasoned that the mandate to buy health insurance was a Constitutional exercise of Congress’ taxation power.

Whether or not you agree with this decision, it’s clear the government has always used its taxing power to steer you in certain directions. While not mandates, here are some examples where Uncle Sam uses both stick and carrot…

1. Raise children

Can the government mandate that you procreate? No, but it offers tax savings for those who do. The tax code currently offers a $1,000 per child tax credit – That’s a direct reduction in taxes owed. In addition, kids mean additional exemptions, which are essentially tax deductions. Each exemption you claim in 2012 is worth $3,800, so a married couple with two kids will get four exemptions that add up to $15,200 in deductions.

And that’s just the beginning. Uncle Sam also offers tax breaks for child care and education expenses, among others.

Why you should do this: Of course, nobody is going to have children just for the tax benefits – the cost of raising kids far exceeds any deductions you might earn. But if you do have a child before Jan. 1, the benefits extend across the entire tax year.

2. Get married

There’s no mandate to get married, but the tax code can be favorable to married couples filing jointly. True, combined incomes can result in a higher tax bracket, resulting in what’s traditionally been known as a “marriage penalty.” But that penalty was eliminated by the 2001 Bush Tax Cuts, and it’s not expected to return until 2013. Furthermore, combining incomes can reduce taxes, especially when one spouse earns a lot more than the other.

Why you should do this: According to Forbes, “Far more common than getting hit with this (marriage) penalty is the bonus married couples stand to derive from filing jointly. Since the lower tax brackets for married couples kick in at exactly twice the level of the same brackets for singles, couples with two substantially different incomes can benefit.”

3. Borrow money to buy a house

Our tax code subsidizes home buyers, but not renters. While mortgage interest is often tax-deductible, rental payments never are. Thus Uncle Sam offers persuasion to buy a home.

Why you should do this: When considering whether to purchase a house, figure in the mortgage interest tax deduction.

4. Stop smoking

Smoking isn’t illegal (yet), but the federal, state, and local governments tax cigarettes and other tobacco products at a much higher rate than most other goods.

Why you should do this: Spend an equal amount purchasing chewing gum, jelly beans, or nicotine patches, and you’ll spend far less in taxes. More importantly, you’ll reduce the likelihood of sickness and death from preventable illnesses.

5. Give to charity

Congress created charitable tax deductions so you can deduct money and property given to qualifying nonprofits. That means for most people, the out-of-pocket cost is less than the amount you give.

Why you should do this: The idea behind this tax deduction is to encourage giving to good causes. Hard to argue with that.

6. Drive your old car

The government won’t force you to drive your rusted wreck, but when you purchase a new car, most states will force you to pay sales tax on it. In fact, most states even require you to pay sales tax on used vehicles.

Why you should do this: Keeping your old car for as long as possible reduces the taxes you pay and saves you money vs. buying another one.

7. Buy a new fuel-efficient car

If you must buy a new car, the government wants you to make it as gas-sipping as possible. The federal government offers tax credits for diesels, plug-in hybrids, electric vehicles, and alternate-fuel vehicles. And many states do too.

Why you should do this: The federal and even state tax credits are nice, but as gas prices rise, so do the savings at the pump.

8. Invest for retirement

The government actually does mandate that part of your income be deducted to the Social Security program (with a few exceptions). Beyond that, the tax code encourages you to make additional contributions toward your retirement savings.

Why you should do this: From IRAs to 401(k)’s, the tax code is full of advantages when people choose to save toward retirement rather than spend their money or put it into other investments. If you ever hope to live on an income beyond your Social Security benefits, you’d be crazy not to use these tax-saving investment vehicles.

Bottom line…

There are few instances where the government forces you to spend money. But Congress has created a complicated tax code that has the effect of promoting some behaviors while discouraging others. By understanding how this system works, you can make the best choices for you and your money.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
This Chase Card Is Great for Groceries and Cash Back on Everything
This Chase Card Is Great for Groceries and Cash Back on Everything

You could earn more than $600 cash back in your first year just from grocery shopping.

5 Reasons You Should Work for as Long as You Live
5 Reasons You Should Work for as Long as You Live

These benefits might make you think twice about retirement.

15 Great Amazon Finds You Can Buy for Less Than $5
15 Great Amazon Finds You Can Buy for Less Than $5

These products offer big value at a small price.

5 States Where Drivers Pay the Most for Car Insurance
5 States Where Drivers Pay the Most for Car Insurance

Auto insurance will cost you more than three times as much in one state compared with another. Here’s how to lower your rates no matter where you live.

17 Home Upgrades That Rarely Help Close a Sale
17 Home Upgrades That Rarely Help Close a Sale

Real estate agents give these renovations low marks when it comes to helping sell homes.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

7 Home Improvements That Cost a Lot More in 2021
7 Home Improvements That Cost a Lot More in 2021

These projects will take a bigger bite out of your budget than in the recent past.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

Never Buy These 10 Things on Amazon
Never Buy These 10 Things on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.