Every taxpayer tries to make sure that the IRS gets as little as possible.
Some taxpayers do not know about all of the tax breaks available.
Here are 10 of the most overlooked tax breaks that could save you some tax dollars.
1. Additional charitable gifts
Many taxpayers remember to count the monetary gifts given to favorite charities, but the expenses that are incurred while doing charitable work is often not counted for on returns. If you use your car for charitable purposes, the IRS will let you deduct that travel at 14 cents per mile. The cost of supplies or material bought for volunteering is also deductible.
2. Moving expenses
It is known that many moving expenses can be written off by a taxpayer relocating to take another job, but is it known you can write-off the expenses if it is your first job? The IRS will allow a recent college graduate who relocates for a first job to write-off these expenses.
3. Job hunting costs
Already-employed workers can deduct the costs of hunting for a new job. Costs associated with looking for a new job in your present occupation are deductible as long as you itemize. These costs would include fees such as resume preparation and employment of outplacement agencies. In order for these costs and other miscellaneous itemized expenses to be deducted, they must exceed 2 percent of your adjusted gross income.
4. Military reservist’ travel expenses
Members of the military reserve forces and National Guard who travel more than 100 miles to stay overnight for the training exercises can deduct related expenses. The related expenses would be the cost of lodging and half the cost of meals. If driving to the training, keep track of any parking or toll fees along with your miles. For your 2011 return you can deduct your miles at 51 cents per mile through June 30 and 55.5 cents per mile for that last half of the year. The Form 2106 needs to be filled out in order to receive this deduction.
5. Child, and more, care credit
The Child and Dependent Care Credit help cover costs of after-school day care. Many people overlook this tax break, as it also applies to child care costs during the summer. The tax break applies to summer day camp costs because it is a day-only getaway that supervises the child while the parents are working. Overnight summer camp costs cannot be claimed. This credit can also be used if you have an adult dependent who needs care while you work.
6. Mortgage refinance points
You get to deduct the points paid on the loan on your tax return for that year of purchase when you buy a house. If you refinance your home loan, you might also be able to deduct those points if you use refinanced mortgage proceeds to improve your principal residence.
7. Many medical costs
Taxpayers who itemize deductions know how difficult it often is to reach the 7.5 percent of adjusted gross income threshold required before you can claim any medical expenses. To make it easier to get over the hurdle look at miscellaneous medial costs, which would include travel expenses to and from medical treatments, insurance premiums from already-taxed income and even alcohol or drug abuse treatments. Deducting 100 percent of health insurance premiums as an adjustment to income on Form 1040 is allowed by self-employed taxpayers who are not covered by any other employer-paid plan.
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 IRA (traditional or Roth) 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. This is a $1,000 tax credit, which is a tax break that directly reduces dollar for dollar any tax you owe.
9. Educational expenses
For individuals who want to further their educations, the Internal Revenue Code offers many tax-saving options. The tuition and fees deduction can help you take up to $4,000 off your taxable income and is available without having to itemize. The Lifetime Learning Credit could provide some students or parents up to a $2,000 credit. The American Opportunity tax credit, which was extended through tax year 2012, offers a dollar-for-dollar tax break of up to $2,500.
10. Energy-efficient home improvements
Tax breaks for energy efficient home improvements expired at the end of 2010; however, some homeowners may still be able to get a tax credit of up to $500 on their 2011 returns for a few common residential energy upgrades. Unfortunately, the tax credit is just a third of what was previously available. It is important to 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. And the overall $500 tax credit cap applies to anyone who received any previous energy tax credit since Jan. 1, 2005. If you qualify, this tax break is a tax credit, which gives you a dollar-for-dollar reduction on your tax bill.
To make sure you don’t miss any tax breaks, call us at 401-254-0151 to make an appointment. We look forward to hearing from you.