(MONEY Magazine) – TAXABLE EVENTS. It seems that everything we do these days triggers one. Still, there is nothing like April 15, the mother of all taxable events, to put your nerves on edge. Thanks to changes enacted this year, though, finding a last-minute ace up your sleeve may be easier. Retirement and education savers are big winners, and home sellers picked up an important new tax break. On the teeth-gritting side, the millions of refinancers face some daunting paperwork, and the alternative minimum tax (AMT) looms large for a growing number of people. Battered portfolios and lost jobs cast a shadow in 2002, but related deductions could mean savings on April 15. And Uncle Sam wants you to file online. Here's what you need to know. For more filing tips, visit www.money.com/taxes.

HOME

IF YOU SOLD. Until recently, to be eligible for the full capital-gains exclusion on the sale of your primary home ($250,000 for an individual, $500,000 for couples filing jointly), you had to have lived in it for two of the previous five years. The IRS has loosened up. If you can't satisfy that requirement but had to sell due to any one of several "unforeseen circumstances," you can now qualify. Those include health problems, a new job, divorce, the birth of twins (or triplets or more) and caring for an older relative. The rules are retroactive, and you have three years to amend a tax return.

IF YOU BOUGHT. Mortgage points are generally deductible the year they are paid. Mortgage interest as well as property taxes are deductible.

IF YOU REFINANCED. When you refinance, you can't deduct points up front. Instead you must spread the deduction over the life of the loan. If you refinance again--a common practice nowadays--you can deduct all of the remaining points from the first refi. If you take out a bigger mortgage to get cash from your home, the interest on that excess is deductible only if you spend the money on a current home improvement project.

IF YOU TAPPED HOME EQUITY. With a home-equity loan, you can deduct the interest on up to $100,000 in debt, no matter how you spend the cash. If, however, the money is used for home improvement, then it's treated as a first mortgage for tax purposes, and you can deduct interest on as much as $1 million in debt. Borrower beware: Tighter restrictions apply if your home-equity loan and your mortgage add up to more than the value of your property.

INVESTMENTS

If you sold stocks or funds before Dec. 31 to lock in a gain or (more likely) a loss, now the trick is making the most of those sales. "Realized losses are valuable assets," notes Joel Dickson, Vanguard's tax planning expert. The rules: You can offset gains with losses dollar for dollar, first by matching short-term gains (on investments held for a year or less) with short-term losses (including carryovers) and next by matching long-term gains with long-term losses. Then you can mix short-and long-term. Long-term gains are taxed at a top rate of 20%, while short-term gains are taxed at your income tax rate, so short-term losses are valuable. If you have more losses than gains, you can deduct up to $3,000 in losses from ordinary income and carry forward unused losses indefinitely. Reminder: Don't forget unused losses from previous years when you're tallying up 2002 deductions.

ELECTRONIC FILING

--FREE E-FILING. The IRS and 17 tax preparers have formed the Free File Alliance. To see if you're eligible to file for free, go to www.irs.gov.

--COMMERCIAL SITES. Our favorite tax prep websites are just as complete as their software counterparts. At HRBlock.com ($20 for federal returns until March 31, $30 thereafter; $10 for each state return), you can get on-screen help or spend $20 for a pro to review your return. TurboTax.com ($30 federal until April 1, $40 thereafter; $15 state) boasts lots of helpful features, including links to more than 50 financial institutions that let you download data. TaxActOnline.com ($10 federal; $8 state) is the most basic of our top picks. Tax help is from J.K. Lasser's Your Income Tax Guide 2003.

--SOFTWARE. For the Web-wary, there's software. Once you fill out your return on your own computer, you can file federal returns electronically at no extra cost. H&R Block's TaxCut Deluxe for Windows is just $25 ($40 for Macs). Intuit's TurboTax Deluxe is $40 ($50 for Macs); editions customized for investors and retirees are $50. TaxAct ($20; PC only) is best for simple returns. --BRIAN L. CLARK

RETIREMENT

You have until April 15 to fund most retirement plans and take advantage of 2002's higher contribution caps (see the table below). You can put as much as $3,000 in an IRA, for instance, up from $2,000 last year. If you're 50 or over, that max is $3,500. The income limits for a partial IRA contribution have also increased. Who says procrastination can't pay? As long as you opened a Keogh in 2002, you have until the filing deadline to fund it. Including extensions, that could be as late as Oct. 15.

Retirement plan 2002 contribution limit Limit if 50 or older

IRA[1] $3,000 $3,500 Simple IRA 7,000 7,500 SEP-IRA 40,000 40,000 Keogh 40,000 40,000

Notes: [1]Roth and traditional. Eligibility for deductible IRA phases out between adjusted gross incomes (AGIs) of $40,000 and $50,000 for singles; $60,000 and $70,000 for joint filers. Eligibility for Roth IRA phases out between AGIs of $95,000 and $110,000 for singles; $150,000 and $160,000 for joint filers. Source: IRS.

EDUCATION

COVERDELL EDUCATION SAVINGS ACCOUNT. You can put up to $2,000 in one, up from $500 in 2001, and the income limits for eligibility are higher. (See the table below.) Withdrawals are tax-free as long as the money is used for education costs such as tuition, books and computers--for any school, not just college. You have until April 15 to open one for 2002.

TUITION DEDUCTION. The 2001 tax bill added a new deduction for college tuition (yours, your spouse's or a dependent's). It's as much as $3,000 in 2002. The best news is that this is a so-called above-the-line deduction, which means you can take it even if you don't itemize.

STUDENT LOANS. This year you're more likely to be able to write off some of your student-loan interest. It's now deductible for 10 years, not just the first five.

MAXIMUM AGI TO QUALIFY FOR FULL BENEFIT Single filers Married filing jointly

Coverdell Ed. Savings $95,000 $190,000 Account ($2,000 max)

Higher education tuition 65,000 130,000 deduction ($3,000 max)

Student-loan interest 50,000 100,000 deduction ($2,500 max)

Notes: Singles with AGI between $95,000 and $110,000 and married couples filing jointly with AGI between $190,000 and $220,000 can partially fund a Coverdell Education Savings Account. Singles with AGI between $50,000 and $65,000 and marrieds filing jointly with AGI between $100,000 and $130,000 qualify for a partial student-loan interest deduction. Source: IRS.

ALTERNATIVE MINIMUM TAX

It's taxpayer Bizarro World. The alternative minimum tax (AMT), created to prevent the very rich from avoiding taxes altogether, has been lurking in the tax code for ages. Now it's creeping up on middle-income taxpayers (see the chart at right). The AMT is a separate tax system that imposes a flat 26% rate on income up to $175,000 and a 28% rate above that, and excludes deductions such as state taxes. You should calculate both your AMT and your standard income tax, and pay whichever is higher.

One culprit behind the growing reach of the AMT is the 2001 tax cut--lower regular tax rates mean that the AMT is the higher tax for more people. (President Bush's plan to speed up rate reductions could make the problem even worse.) There is little you can do at filing time--instead, look ahead. By adapting your investments (corporate bonds instead of munis) and reversing the usual tax strategy of maximizing deductions, you may be able to make Bizarro World a bit more tax-friendly. A good tax adviser can help.

AUDIT TRIGGERS

By the numbers, audits are technically up: The IRS audited 732,000 individual returns in 2001 vs. 618,000 the year before. As part of a research program that began last fall, the IRS is randomly auditing an extra 50,000 returns. And the agency has announced that it is taking aim at offshore tax shelters (see page 30). Yet considering that 129 million returns were filed last year, your risk remains fairly low. Triggers that can spark a second look--or at least a letter asking for more information--range from certain deductions to simple mistakes. They include

--sudden spikes in income --missing forms or undocumented income --an unsigned return or missing Social Security number --math errors --filing a Schedule C--small business owners are three times more likely to be audited than wage earners are --deductions exceeding the norm for your income --taking the home-office deduction --casualty losses to your home.

OVERLOOKED DEDUCTIONS

Taxpayers miss an estimated $1 billion worth of deductions. Some new and often overlooked ones you don't want to forget:

SELF-IMPROVEMENT. Weight-loss and smoking-cessation programs prescribed by a doctor are deductible medical expenses if they exceed 7.5% of adjusted gross income (AGI).

HYBRID CARS. Buying a qualified clean-fuel vehicle makes you eligible for a $2,000 write-off.

HEALTH INSURANCE. If you are self-employed, you can deduct 70% of health insurance premiums this year, up from 60%, as long as you are not eligible for any employer-sponsored coverage (including your spouse's).

SMALL BUSINESS. Owners can hike depreciation of equipment and other property (not real estate) by 30%.

UNREIMBURSED WORK EXPENSES. Travel, calls, supplies and training are miscellaneous deductions.

LEFTOVERS. If you couldn't deduct all of your capital losses or charitable contributions on last year's return, you may be able to do so this year.

JOBS

New job? Job-search costs (including resume prep and travel) are miscellaneous expenses, which are deductible if they exceed 2% of AGI. Relocation expenses may also qualify. COBRA health insurance premiums are deductible if they top 7.5% of AGI.

ADOPTION

The maximum credit for adoption expenses is now $10,000, up from $5,000. Eligibility begins to phase out once your AGI hits $150,000 (joint and single filers) and ends at an AGI of $190,000.