Little-known tax breaks could save you money

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PHOENIX -- In these tough economic times, everyone could use some extra cash.

3 On Your Side is revealing some little-known tax breaks that could make you money.

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When I started looking into taxes, I came across some pretty exciting news that I think could and will affect a lot of Arizona residents.

First, let's talk about the housing market and how one tax benefit could help folks who had to do what's called a "short sale."

Now, a "short sale" is when your mortgage company allows you to sell your home for less than what you owe.

For example, if you owe $300,000, but you sold your home for $250,000, then that $50,000 difference would normally be counted as income and you would have to pay federal taxes on it.

But because of the housing crisis, Uncle Sam is cutting you a break.

"That's old law so the new law is that if there is a debt that is forgiven, you don't have to add it into your income," said Bill Brunson, who is with the Internal Revenue Service in Phoenix.

Brunson said when it comes to the tax code there are other benefits to help you out.

For example, there's something called the First-Time Home Buyer Tax Credit. Basically, the federal government will loan first-time homebuyers $7,500 to use any way they want.

The loan is interest free and the only stipulation is that you pay back $500 a year for 15 years.

A lot of first-time homebuyers sure could use an extra $7,500.

"There is no specific requirement as to what you need to do with that money," Brunson said. "It's an item available to first-time homebuyers as an incentive."

The federal government hopes the incentive eliminates the number of homes on the market.

If real estate isn't your bag, how about getting paid to ride your bike to work?

"The IRS is going green," Brunson said.

Starting next month, if you ride your bike to work, your employer just may pay you an extra $20 a month as an incentive to cut down on driving.

As a result, your employer will enjoy a $20 a month tax cut.

"The employer would pay you $20 a month for the upkeep, maintenance of the bicycle to come to work every day," Brunson said.