Each year, Americans make changes in their lives that impact their taxes. Whether you started a new job, sent a kid off to college, or made home improvements, there are tax breaks available that could help put a few extra dollars in your pocket this tax season.
Before you file, check out these money-saving tax moves that will help maximize your refund:
Did you change jobs or start your own business in 2011? With an average unemployment rate of 8.9 percent, millions of Americans were hunting for a new job in 2011. If you were one of them, your job search, moving expenses, and home-office expenses might be tax deductible.
• Job-search expenses: All those resume copies, outplacement agency fees, career seminars, and even business-related travel might be tax-deductible if you actively searched for a job in the same profession as your previous one. To be eligible for the deduction, however, only your job-search expenses greater than 2 percent of your adjusted gross income can be claimed. You must also itemize your deductions.
• Moving expenses: Moving expenses related to a new job may be tax-deductible if you meet the distance and time tests. Plus, you could be eligible even if you do not itemize.
• Unemployment benefits: Many people are asking if the first $2,400 of unemployment income is tax-free, but that tax benefit expired Dec. 31, 2010. Unfortunately, this year, you must pay tax on all unemployment benefits you received.
• Home-office deductions: Many entrepreneurs are hesitant to write off the business use of their home, but there are many deductions they shouldn’t miss out on. To qualify for the home-office deduction, you must use part of your home exclusively and regularly 1) as your principal place of business; 2) as a place to meet with customers as part of your business; or 3) where the business portion of your home is a separate structure not attached to your home.
Did you welcome a new addition to the family or send a child off to college?
Parenting can be hard work and costly. Whether you have new additions to the family, college-bound students, or kids in daycare, you might get a little extra money back in your pocket at tax time.
• Dependent deduction: This is one of our most frequently asked questions today, due to the changing dynamics of relationships. You can claim a “qualified child” or “qualified relative” if they meet certain criteria. You may even be able to claim your boyfriend or girlfriend as a dependent if they meet all seven tests for a qualifying relative, one of which includes living with you for the entire year.
• Education credits: The U.S. government provides incentives in the form of education tax credits and deductions to help decrease the economic impact of pursuing a college education. If you paid eligible education expenses for yourself, your spouse, or your dependent, you may qualify for one of these tax benefits.
• Child and Dependent Care Credit: If you paid for childcare, dependent care, or even summer camp so you could work, you may be eligible to deduct 20 to 35 percent of qualifying expenses, up to $3,000 for one qualifying individual and up to $6,000 for two our more qualifying individuals.
• Adoption credit: If you chose to adopt, you may be eligible to take a Qualified Adoption Tax Credit up to $13,360 for qualified expenses associated with the adoption.
Did you buy or refinance your home? Whether you were one of the 302,000 new homeowners in 2011 or longtime homeowners, there may be tax deductions available to help offset some of the financial costs of being a property owner.
• Mortgage refinance: If you took advantage of lower interest rates and refinanced your home, you may be able to take a tax deduction for the points paid (loan origination fees) to refinance your home loan.
• Energy tax credits: The Residential Energy Tax Credit was reduced in 2011, but you still may be able to deduct up to $500 for insulation, roofs, and doors.
• First-Time Homebuyer Credit: If you were lucky enough to receive the First-Time Homebuyer Credit in 2008, you were supposed to start repaying the tax credit in 2010 over 15 years through your tax return. That means you will need to make that payment again this year on your taxes.
What are some of the money saving tax moves you’ll be making to help lower your tax bill?
Lisa Greene-Lewis is a CPA and TurboTax Tax Expert. Lisa has 15 years of experience in tax preparation. In addition, Lisa has a very well-rounded professional background and has held positions as a public auditor, controller, and operations manager.
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susanbrown664 of CA 4:10AM May 11, 2012
Denise Davis of CA 6:24PM March 15, 2012
carlesgibbons of CA 4:54AM March 15, 2012