Sitting down with a year's worth of paperwork is no fun, but your refund's arrival is enough to make you jump for joy. Lisa Greene-Lewis, Lead CPA of the American Tax and Financial Center at TurboTax helps make it even sweeter with these often-missed write-offs. By Ava Feuer, REDBOOK.
If you're concerned about working after school lets out for summer, you can breathe a sigh of relief. Under the Child & Dependent Care Credit, day camp and daycare for children under 13 are tax deductible, presuming you're using the program so that you can work or look for work. Depending on your income, the deductible percentage ranges from 20 to 35 percent. For a family whose annual household income is $60,000, that amounts to $1,200 for two or more children, or $600 for one child. To qualify for a higher tax credit, your adjusted gross income must fall below $43,000.
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If you operate your business out of a home-office or telecommute, a portion of everything from your utilities, to your real estate taxes, to your rent or mortgage may be deductible. "The deduction is based on the percentage of your home you use for business," explains Greene-Lewis. "So if your house is 2000 square feet, and your office is 200 square feet, you can take a deduction worth 10 percent." A phone or fax line will provide adequate proof that you're using part of your home for work. "A lot of people skip the deduction because they think it's difficult or complicated, and they're afraid of being audited, but according to the IRS, less than one percent of taxpayers are audited," Greene-Lewis adds.
If a health crisis hit your family in 2012, your medical and dental expenses may be tax deductible, presuming they were incurred for the the diagnosis, cure, treatment, or prevention of disease and amounted to more than 7.5 percent of your adjusted gross income. But be aware that this doesn't include what insurance pays - only out-of-pocket expenses. Common deductibles include annual physical exams, ambulance fees, psychotherapy, and physical therapy, though elective cosmetic surgery, non-FDA approved medications, and funeral expenses are not eligible. For the full list of what you can and can't write off, click here.
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Earned income tax credit
Originally developed to encourage people to return to the workforce, this credit gives an extra break to low-to-moderate income workers. However, 20 percent of Americans don't file for it. "A lot of people miss out on this tax credit because they think they don't make enough money to file taxes, and you have to file to reap its benefits," says Greene-Lewis. But anyone whose annual earned income falls below $45,000 may be eligible, and a mother with three or more dependent children can receive up to $5,891. Unlike many breaks, you don't need to have taxes taken out of your paycheck to receive it, meaning you could get back thousands more than what you paid in taxes.
Job search expenses
If you switched, or even considered switching jobs in 2012, you can write off expenses directly related to your hunt, like travel, cost of resumes, and placement agency fees - even if you didn't land or take the new gig. However, you only qualify if your transition was within the same field, and there wasn't a significant break between when your old job ended, and when you began looking for a new one. All deductible costs must be in excess two percent of your adjusted gross income, and cannot be ones for which your company already reimbursed you, which would be considered double-dipping.
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In a year of heavy devastation, including that from Hurricane Sandy, you and your family may have set aside time to donate to a cause. Those expenses - such as travel costs to visit and work in a disaster zone or food and supplies you bought for a benefit - are deductible, presuming the organization is an approved not-for-profit. Consult this list to check on yours, but be aware that school districts don't qualify, so all those bake sales won't earn you any cash back.
Need yet another reason to save for retirement? You can continue to make contributions to your IRA until April 15th - and still take the tax deduction for depositing funds on your 2012 return. "You can attribute up to $5000 for 2012, so if you haven't done that yet, add in the money before the tax deadline," says Greene-Lewis. That $5000 applies only to what you put away, not employer-match, and solely to traditional IRAs - not 401Ks or Roth IRAs. Those with modified adjusted incomes below $28,750 if single, and $57,500 if married and filing jointly may also earn an additional "saver's credit," good for adding another $1,000 credit to your tax savings.
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