(MONEY Magazine) – When you gather up your W-2s, 1099s and crumpled receipts to figure your taxes this time of year, you're probably hoping for some shred of good news. How's this: Because April 15 falls on a Saturday in 2006, you have two extra days to file. Not enough? If you can't manage by mid-April, you can get a six-month extension (to file, not pay), up from last year's four months. And wait, that's not all. You can put $1,000 more in an IRA, qualify for valuable education credits with a higher income and take a bigger standard deduction than last year. Okay, enough already. You get the picture. The best tax news you can get this year is the good news you make for yourself, by avoiding costly mistakes and unearthing the many opportunities to save money that are buried in your return. Follow our guide to find them--and make sending less to the IRS the nicest news of all.

HOW TO FILE Embrace Your Computer

Why file electronically? How about a refund within two weeks and fewer errors? Your tax preparer can e-file for you (and likely will). If you're a do-it-yourselfer, you need to do your taxes with software or online.

SOFTWARE Popular programs like TurboTax (turbotax.com), TaxAct (taxact.com) and H&R Block's TaxCut (taxcut.com) all support e-filing. Using them on the Web often costs less than buying the software. You'll pay less than $10 for an easy federal return, or as much as $70 for a complex state and federal one, including e-filing.

FREE FILE The IRS has partnered with a few dozen commercial preparers to offer free online tax prep as well as e-filing (go to irs.gov). The program is limited to those with an adjusted gross income (AGI) of $50,000 or less. To find out if your state has free online filing, check the list at taxadmin.org.

> 22 States with free online tax prep

RETIREMENT Save Money and Save

You still have time to plump up your nest egg. The IRA limit for 2005 is $1,000 higher than it was in '04. If you qualify for a deduction (income limits apply), funding an IRA will lower your tax bill. You can make Roth or traditional IRA deposits as late as April 17.

IN THE NEWS: GRAB THESE TAX BREAKS

Hurricane Relief for All After the devastating fall hurricanes, Congress passed a tax bill that benefits those who live in the affected areas--and all Americans who helped.

FOR HURRICANE VICTIMS ONLY You can fully deduct your casualty losses, which normally must exceed 10% of your AGI and $100 per loss to qualify. You can also make penalty-free IRA withdrawals, and you have more time--three years--to pay tax on the earnings.

FOR EVERYONE Hurricane volunteers who drove can deduct 34¢ a mile (vs. the typical 14¢); if you housed victims for at least 60 days in a row, you can deduct $500 per person (four-person max); and gifts made to any charity after Aug. 28, 2005 are fully deductible, even if they exceed 50% of your AGI.

Kids Count More Than You Think

WHAT'S A CHILD? Any parent would consider that an easy question. Now the IRS thinks so too. This year there's finally a single (but still technical) definition of who qualifies as a child on your tax return. Even if the new rule doesn't affect you--it could if you're divorced, for instance, or the parent of an adopted child--all the old benefits of parenthood still apply.

CHILD TAX CREDIT You can take the full $1,000 credit for a child under age 17 as long as your AGI is under $110,000 for a married couple or $75,000 for a single parent.

CHILD- AND DEPENDENT-CARE CREDIT If you pay someone to watch children under age 13--at home, in day care, at camp--you may qualify. This credit is for as much as 35% of $3,000 in such costs, or $6,000 for two or more kids, making it worth up to $1,050 for one kid, $2,100 for two or more. Sleepaway camp, alas, is seen as a luxury by the IRS (and some parents), so those fees don't qualify.

ENJOY THESE SAVINGS WHILE YOU CAN Help with College Costs

If you have a student in college, a valuable tax perk is scheduled to disappear after this year: the ability to deduct up to $4,000 in tuition and fees. To qualify for the entire deduction, your AGI can't exceed $130,000 if you're married, $65,000 if you're single. You can take a partial deduction with an AGI up to $160,000 (for married couples) or $80,000 (singles).

Fortunately, two potentially more precious breaks will stick around, and higher-income cutoffs this year increase the chance that you'll qualify for them. You can use the HOPE credit to recoup up to $1,500 in tuition during the first two years of college (a credit reduces your tax bill dollar for dollar); the lifetime learning credit is worth as much as $2,000 during college or graduate school (up to 20% of $10,000 in costs). You cannot take both credits in the same year for the same student. You don't qualify for the full credits when your AGI hits $87,000 if you're married, $43,000 if single. You lose them entirely when your AGI hits $107,000 ($53,000 for singles).

> $4K Tuition deduction to expire

When the Sales Tax Pays

Also due to expire: the option to write off either your state and local income or sales tax. Use the IRS tables to figure your deduction (Publication 600, available at irs.gov). If you bought a car, boat or plane last year, you can add the tax you paid to the IRS figure.

what's new Two more months to do your taxes, a way to preview your AMT, and help with higher gas prices

MORE TIME TO FILE Can't finish by April 17? Previously, you could automatically get four more months--until smack in the middle of your August beach vacation. This year the IRS extended the extension to six months. File Form 4868 by mail or at irs.gov/efile.

STINGIER RULES FOR CAR GIFTS As of 2005, if a charity sells the car you donate (as most do), you can deduct only the proceeds from the sale, not the full fair market value.

AN AMT FAST FORECASTER An estimated 4 million taxpayers will owe the alternative minimum tax this year, so the least the IRS can do is help you find out if you're one of them. Its new AMT Assistant is a boon if you do taxes by hand--the agency estimates that the calculator will take five to 10 minutes vs. an hour or more for the paper worksheet. Find it at apps.irs.gov/app/amt.

GAS RELIEF If you drive your car for business, you're hurting at the gas pump. The IRS, it appears, feels your pain. It raised the standard mileage deduction from 40.5¢ to 48.5¢ a mile as of Sept. 1. For 2006, it'll be 44.5¢.

MADE OUT IN THE U.S.A.? Do you run a business that makes widgets, builds homes or develops software on these shores? Then you'll love the new domestic-production deduction: It's worth up to 3% of your net income.

MASTER THESE TRICKY WRITE-OFFS Profit from Self-Improvement

Think how much you spend trying to stay healthy, not to mention getting well once you're sick. If a sounder mind and body aren't reward enough, see if your good intentions can win you a break on your taxes too. Qualified medical costs that exceed 7.5% of your AGI are deductible. That's a high hurdle, but consider what could put you over the top: prescribed weight-loss programs, stop-smoking classes, acupuncture, chiropractic care, therapy, braces, eyeglasses and lead-paint removal if you have a kid at home. See IRS Publication 502 for a full list.

> 7.5% of AGI The medical deduction threshold

You Must Remember These Missing a write-off is like donating money to Uncle Sam. Don't overlook these.

LEFTOVER LOSSES Each year you can offset investment gains with losses. If your losers add up to more than your winners, you can deduct up to $3,000 from your regular income and carry forward the rest. Pull out last year's return and look for capital losses that you couldn't use.

TOO MUCH TAX If you switched jobs last year, you might have had too much Social Security tax withheld. Check your W-2s. If more than $5,580 was docked from your paychecks, claim a credit for the overpayment.

MISCELLANY Certain costs that top 2% of your AGI are deductible. That includes what you pay to manage your money: safe-deposit-box fees, calls to your broker, tax-prep fees and subscriptions to investment journals.

OLD COLLEGE COSTS It's easy to think that only mortgage interest is deductible. Not so. Student-loan interest is deductible, even if you don't itemize.

> $2,500 Student-loan deduction max

New Loan? Deduct This.

Last year was the third-busiest ever for home loans. If you bought, borrowed or refinanced, don't forget to deduct your origination fees and discount points. When you refinance, you must spread the deduction over the life of the loan; on a second refi, though, you can deduct all remaining points from the first.

Home Work, Not Homework

Work at home and you may be able to write off your home office. Tread carefully. This deduction is not only one of the trickiest breaks around, it's also one that could get you audited.

• THE RULES For starters, your home office must be your principal place of business, not a backup for the cubicle your boss provides, and you generally can't use the room for anything else. So it can't be half TV room, half office. It's all office, all the time.

• THE MATH To calculate the size of the deduction, first determine what percentage of your home your office takes up--by square footage or number of rooms. Apply that percentage to your housing costs (including mortgage interest, utilities and upkeep) to arrive at your deduction.

• THE DOWNSIDE What makes this deduction such a gold mine is that every year you can also write off a portion of what you paid for your house. But when you sell, all that depreciation is treated as a taxable gain.

ADDITIONAL REPORTING BY JUDY FELDMAN

ADDITIONAL REPORTING BY Judy Feldman contributed to this article.