“You better save that receipt.” “Put those in your records.” And so on and so forth.
Most of the time you probably don’t even know what it is you’re “putting up” or saving for tax purposes. Or worse, tax season finally rolls around, and you don’t even know what to do with all the information you kept up with throughout the year.
Well, here is the real scoop. Make sure your friends check this out too so you all are on the same page. And no one will ever again have to randomly suggest what to do with receipts or tell you to “Write your gas mileage down, that’s money!”
Here are ten of the most common tax credits and deductions that you most likely are eligible for during your next tax season.
1. Charitable Contributions
Gather written proof of any cash or property donations to charitable organizations like churches, schools, or nonprofits, including the estimated value of each donated item, and you could deduct up to 50% of your Adjusted Gross Income (AGI).
2. State Sales Tax
You know you’re allowed to deduct either your state income tax or state sales tax that you pay, which is why you’ve always heard “Save your receipts!” But, unless you’ve made some really big purchases along with diligently keeping track of everything, it may prove less stressful to just deduct your state income tax. That is, if you live in a state that imposes an income tax.
If you reside in a state that dictates no such tax, then you can deduct from the sales tax that you’ve paid throughout the year. Keep this in mind, you probably won’t receive much Return on Investment (ROI) by saving every grocery store receipt, but you can definitely see a significant return from high-cost consumer goods.
3. Medical Costs
Get together all of your Health Saving Account (HSA) contribution records. These contributions can be deducted even they aren’t itemized. You may also be able to deduct qualified medical costs like doctor visits and prescription drugs if the total amount exceeds 10% of your AGI; however, these expenses need to be itemized. So, get in contact with your doctor and pharmacy for printouts you may no longer have.
4. Work-Related Expenses
You relocated for another job and weren’t reimbursed or you’re self-employed, right? Not only can you claim a deduction for your moving bill, you can also deduct from job-hunting costs like résumé preparation or employment-related costs such as buying a work uniform.
5. Childcare Costs
Oh, this is the big one. Or rather, the most commonly known one. Under the Child and Dependant Care Credit, you can claim childcare expenses for qualifying dependants age 13 or younger. Deductions can go up to $3,000 for one child or up to $6,000 for two or more children.
6. Caring For an Elderly Parent
On the filpside of the Child and Dependant Care Credit, you can apply the same deduction amounts to the caring for a person of any age who is incapable of caring for themselves either physically or mentally.
7. Educational Expenses
Gather your tuition statements, which is your Form 1098-T, student loan interest statements, and receipts from any qualified education costs like textbooks whether it’s from your college education or your child’s. Also, education credits such as the American Opportunity (Hope) Credit or the Lifetime Learning Credit can be fully deducted from your federal income tax.
Most importantly, if you’re a primary school teacher, you can claim classroom expenses for supplies and other materials purchased for your students.
8. Energy-Efficiency Credit
With the Residential Renewable Energy Tax Credit, you can claim up to 30% of solar-electric property, solar water-heating property, fuel cell property, small wind-energy property and geothermal heat pumps. As you can see, it pays to live green.
9. Earned Income Tax Credit (EITC)
So, this credit is meant to assist working individuals who earn under certain amounts for their household. For example, a married couple making only $20,020 with no child or a married couple making $43,941 with one child.
If you have low to moderate income, you could claim for this credit. To find out if you qualify, visit IRS.gov.
10. Retirement Tax Credit (Saver’s Credit)
This is also for those who make low to moderate income. With the Saver’s Credit, you can claim credit of 10%, 20%, or 50% of your Individual Retirement Account (IRA), which roughly is up to $2,000 individually or $4,000 for married couples filing jointly.
And there you have it… A nice, neat care package that you can reference for this tax season and for other tax seasons to come. You can now put those self-proclaimed “tax expert” friends in their place or, better yet, let them talk. It’ll be funnier that way, just in one ear and out the other. For more details on these deductions visit the IRS website or your local tax professional.
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