8 Commonly Overlooked Tax Breaks

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Tax Breaks that Will Save You Money

Tax Breaks that Will Save You Money

How many times have you finished your taxes and sent them off, only to hear later about a deduction that would’ve been perfect for you? Well, if you’re anything like me, that scenario has played out in your life more than once. Given the fact that it takes the Internal Revenue Service over 70,000 pages to explain the 2010 tax code, it’s understandable how you could miss a deduction or two along the line. If you have a relatively straightforward tax return, simply going line by line through Form 1040 can serve as a useful guide to which deductions and credits you are eligible for. However, let’s highlight a few of the most commonly overlooked tax breaks:

Charitable Contributions

This may seem obvious at first, but beyond the check you wrote to your favorite non-profit organization, there could be several smaller items to add onto your charitable contribution deduction. For example, did you donate any clothes to the Salvation Army? Or maybe you baked three cakes for your church fundraiser? Also, don’t forget that if you drove your car to help a charity, you are entitled to deduct 14 cents per mile.

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Home Loan Points

In general, the points that you pay for a home loan are allowed to be deducted immediately, except those paid to refinance a mortgage, which must be deducted on an amortized schedule over the life of the loan. But if the balance of the loan is paid early by a lump sum (often by selling or refinancing the home), the unamortized loan points can serve as an immediate deductible. Be careful of one exception to this rule; if you refinance your loan with the same lender, you add points paid on the latest deal to the remainder of the previous refinance and amortize the deduction over the life of the loan.

 

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American Opportunity Credit

Tuition rates have been steadily rising over the last decade and educational credits, like the American Opportunity Tax Credit Act that was passed in January of 2009, help provide some tax relief for students. The act is essentially a beefed up version of the previous Hope Scholarship Credit and has already been extended to 2014. If you are a student, it allows for $2,500 of college tuition to be claimed as credit and covers all four years of school. But beware that it begins to be phased out when a single person’s income exceeds $80,000 or for married couples that earn over $160,000

Educator Expenses

If you are a teacher or school administrator, it’s very likely that you qualify for a deduction to reduce you taxable income based the supplies you bought for your classroom. You are allowed an “above the line” deduction of up to $250. “Above the line” means the expense is included in your adjusted gross income and doesn’t get lumped in with itemized deductions. So even if you don’t itemize, this could be a benefit to you.

 

Health Insurance Premiums

Any health insurance premiums you pay are eligible to be deducted, but they must be added to your medical expense total. Medical expenses need to exceed 7.5 percent of your adjusted gross income before they are a tax benefit. However, if you are self-employed, the entire amount of your health insurance premiums can be utilized as an “above the line” deduction.

 

Energy-Saving Home Improvement Credit

If you made any improvements to your home during the year to make it more energy-efficient, such as installing skylights or buying a high-efficiency furnace, you are eligible to claim a tax credit of 30 percent of the cost of the improvements. There is a combined maximum of $1,500 allowed between 2009 and 2010. However, if you installed any qualified alternative energy equipment, such as solar hot panels or wind turbines, there is no cap through 2016. You simply get a 30 percent tax credit on the total cost.

 

Job Hunting Expenses

As unemployment has risen, the job market has become even more competitive, which has forced job seekers to be more proactive. Luckily, if you are looking for a job in the same field that you previously worked, deductible job search costs include travel, lodging, and printing fees, amongst others.

Relocation Expenses for Your First Job

Potential employees in a new line of work can also look forward to a tax deduction. While job-hunting expenses are not deductible for your first job, moving expenses are. Provided that you move over 50 miles, you can deduct the cost of getting yourself and your household goods to the new location, including 16.5 cents per mile for driving your own vehicle, plus parking fees and tolls.

While we’ve listed some areas to be aware of here, there still loads of potential pitfalls throughout the IRS tax laws. One consoling thought is that if you do happen to miss a deduction that you were eligible for, you can file an amended tax return to recoup the overpaid taxes. Typically, you can amend your return up to three years after the original filing date.

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Learn more ways to save money at Quizzle.com, including how to save on your largest monthly expense – your home loan. And check out these other great money-saving articles: