10 Overlooked Tax Breaks

Posted by Joel pate in Uncategorized. Tagged:

The goal of every taxpayer is to make sure the IRS gets as little as possible. So, you need to take every tax deduction, credit or other income adjustment you can. Here are 10 tax breaks — some for itemizers only, others that any filer can claim — that could save you some tax dollars.
1. Additional charitable gifts
Most count the monetary gifts they make to their favorite charities. But expenses incurred while doing charitable work often aren’t counted on tax returns.
You can’t deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost of that material is deductible as a charitable donation. Similarly, if you wear a uniform in doing your good deeds the costs of that apparel and any cleaning bills can be counted as charitable donations. So can the use of your vehicle for charitable purposes, like delivering meals to the homebound in your community or taking the Boy Scouts or Girls Scouts on an outing. The IRS will let you deduct that travel at 14 cents per mile.
2. Moving expenses
Most taxpayers know they can write off many moving expenses when they relocate to take another job. But the IRS allows this write-off for your first job, too. A recent college graduate who gets a first job at a distance from where he or she has been living is eligible for this tax break. This tax break is found in the adjustments to income section at the bottom of Form 1040.
3. Job-hunting costs
While college students can’t deduct the costs of hunting for that new job across the country, already employed workers can. Costs associated with looking for a new job in your present occupation, including resume preparation and employment of outplacement agencies, are deductible as long as you itemize. These costs, along with other miscellaneous itemized expenses, however, must exceed 2 percent of your adjusted gross income to produce any tax savings.
4. Military reservists’ travel expenses
Members of the military reserve forces and National Guard who travel more than 100 miles and stay overnight for training exercises can deduct expenses like lodging and half the cost of meals. If you drive to training, be sure to track your miles. You can deduct them at 56.5 cents per mile, along with any parking or toll fees. You get this deduction whether or not you itemize; it’s one of the above-the-line deductions found directly on form 1040. But you will have to fill out Form 2106.
5. Child care credit, and more
Millions of parents claim the child and dependent care credit each year to help cover the costs of after-school day care while Mom and Dad work. But some overlook claiming the credit for child care costs during the summer. This tax break also applies to summer day camp costs. The camp must be a day-only getaway that supervises the child while the parents work.
Remember, too, the dual nature of the credit’s name: child and dependent. If you have an adult dependent who needs care so that you can work, those expenses can be claimed under this tax credit.
6. Mortgage refinance points
When you buy a house, you can deduct the points paid on the loan for that year of purchase. But if you refinance your home loan, you might be able to deduct those points, too, as long as you use refinanced mortgage proceeds to improve your principal residence.
7. Many medical costs
It is often hard to reach the adjusted gross income threshold required before you can claim any itemized medical expenses on Schedule A. It might be easier to clear that earnings hurdle if you look at miscellaneous medical costs. Some of these include travel expenses to and from medical treatments, insurance premiums you pay for from already-taxed income and even alcohol- or drug-abuse treatments. Beginning this tax year, a health care reform act provision requires you have medical expenses more than 10 percent of your adjusted gross income before you can deduct them.
And self-employed taxpayers, take note. If you are not covered by any other employer-paid plan, for example, one carried by a spouse, you can deduct 100 percent of health insurance premiums as an adjustment to income in the section at the bottom of Page 1 of Form 1040.
8. Retirement tax savings
The retirement savings contribution credit was created to give moderate- and low-income taxpayers an incentive to save. When you contribute to a retirement account, either an individual retirement account or a workplace plan, you can get a tax savings for up to 50 percent of the first $2,000 you put into such accounts. You get a tax break that directly reduces dollar for dollar any tax you owe.
9. Educational expenses
The Internal Revenue Code offers many tax-saving options for individuals who want to further their education. The tuition and fees deduction allows up to $4,000 off your taxable income and is available without having to itemize. The lifetime learning credit could provide some students (or their parents) up to a $2,000 credit.
Don’t forget the American opportunity tax credit, which offers a dollar-for-dollar tax break of up to $2,500. This was created as part of the 2009 stimulus package as a short-term replacement for the Hope tax credit, and was extended through tax year 2017 as part of the American Taxpayer Relief Act of 2012, also known as the “fiscal cliff” tax bill.
10. Energy-efficient home improvements
Tax breaks for some relatively easy energy-efficient home improvements expired at the end of 2013 and might not be renewed. That makes it all the more important to take advantage of the Nonbusiness Energy Property Credit, worth up to $500, when you file your 2013 tax return.
To claim this credit, found on part 2 of Form 5695, you must pay attention to specific spending limits, such as $150 for high-efficiency furnaces and boilers, $300 for air conditioners and heat pumps and $200 for replacement windows. These home upgrades must have been installed at your main residence by Dec. 31, 2013. Note also that the overall $500 tax credit cap applies to anyone who received any previous energy tax credit since Jan. 1, 2005.
If you qualify, it is a tax credit, giving you a dollar-for-dollar reduction of your tax bill. And when it comes to taxes, every dollar saved helps.

By: Kay Bell, www.bankrate.com

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