As Independence Day draws close, Americans have much to celebrate. Besides our personal freedoms and high ideals, we also have many government-based incentives to help us build our own financial independence.

Americans will proudly wave their red, white, and blue flag on July 4th. We're thankful for those three colors; but there's another-green, the distinctive hue of our nation's paper currency-that should also be celebrated on Independence Day.

Our government takes away a fair share of our green every April 15th, but it also returns quite a bit through a variety of tax-friendly deductions. Here are a few that you can use to your advantage as you strive for your own financial freedom.

Retirement fund tax breaks

The government has created numerous tax incentives for individuals to start building their retirement nest eggs. The most popular programs are 401(k)s and IRAs. With either one, you're allowed to set aside a certain number of pre-tax dollars, and pay no taxes on your earnings until you withdraw the money.

The limits for 401(k) contributions are very generous-$15,500 per individual, and $20,500 if you're 50 and older. As a workplace benefit, your employer may kick in matching funds, which typically equal half of what you contribute, up to 6 percent of your salary. For IRAs, you can set aside $5,000, and you're allowed to contribute $6,000 if you're 50 or older.

The money is generally saved through investments such as mutual funds, stocks or bonds. Use retirement calculators, or check with a financial planner, to determine how much you should be saving on an annual basis.

Big-dollar deductions

The government takes a healthy chunk of your paycheck to fund defense, education, and other social programs. However, Uncle Sam provides citizens with a number of tax deductions that help reduce their overall taxable income. The top deductions include:

• Mortgage interest and property-Allows you to deduct mortgage interest and points, as well as property taxes.
• Child and dependent care-If you have children under 13, or a dependent needing care, you're eligible for a credit ranging from 20 percent to 35 percent of your income. Both credits have a dollar limit-$3,000 per child or dependent, and $6,000 for two or more.
• Education -If you're saving for a child's education, the Coverdell savings account or a 529 plan each have tax incentives. If you're paying back student loans, you can deduct up to $2,500 in interest payments every year.

These are some of the most widely-used tax perks, but there are others, as well. Check with your accountant or financial planner to determine which might apply to your individual situation. By using them, you'll be following in the footsteps of our country's forefathers by working to become financially independent. It's a great way to celebrate the red, white, blue, and green of the United States of America.