Even if you tried to keep track of tax law changes-and really, who has the time?-chances are, a credit or deduction is bound to slip by you. Tax laws change from year to year, after all, and what you qualify for often depends on major life changes you've experienced: Were you divorced last year? Did you have a baby? Send a child to college? Lose your job? All of the above scenarios and more will affect what you get back from Uncle Sam. Here, experts share their tips for taxpayers in every phase of life, including possible deductions and credits that you can score.
Just Married (or Remarried)
Ask your tax professional to do your taxes two ways-filing jointly and filing separately, urges Gary Milkwick, head of tax operations at The Tax Club. Depending on your income as a couple, you'll either be subject to "the marriage penalty" (where you pay higher taxes), which is usually the case when both incomes are similar, or "the marriage bonus" (where you pay less), which generally results from a couple having two disparate incomes. But do keep in mind that "Married Filing Separately" is subject to fewer tax benefits than "Married Filing Jointly." You won't really know which applies to you unless you crunch the numbers twice.
Since you can't both claim your child, you and your ex should alternate the years you take a tax exemption for him or her, says Gabrielle Clemens, a lawyer and Certified Divorce Financial Analyst. When it's your year to take the deduction, you may be able to file as the head of household, which means that you'll benefit from a higher standard deduction and lower tax rates compared to the single filing status. Also, discussions with your divorce lawyer about alimony (spousal support) may be tax deductible. However, alimony is taxable income and therefore subject to income tax, explains Clemens.
Had a Baby
Be sure to have your baby's Social Security number on hand, because you can't claim your child as a dependent until he or she has one, says Shannon King Nash, attorney, CPA, and author of For the Love of Money. To apply for a Social Security number, contact the hospital where your child was born or visit the Social Security Administration online. And if medical expenses-including the cost of travel to doctor's appointments, childbirth classes, and hospital room and board-aren't fully covered by your health insurance, you may be able to deduct them, says Nash. If they add up to more than 7.5 percent of your adjusted gross income, you qualify.
Bought a Home
If you recently purchased a home, refer to your contract and/or loan settlement for information required to calculate tax deductions as well as finance charges from your mortgage lender. Called "points," these charges can be taken as itemized deductions. You can also take an itemized deduction for real estate property taxes; you'll find the info on the 1098 form from your lender. Keep in mind that property tax assessments for home and property improvements-such as water mains and sewer lines-are not deductible. But if you purchased energy-efficient appliances for your home last year (look for the Energy Star seal on new washing machines, air conditioners and such) you should earn a credit for a percentage of their price, says CPA Gail Rosen.
Have Kids at Home
If you welcomed an exchange student into your home, you can deduct $50 for every month he or she was living with you as a charitable contribution, according to Vincenzo Villamena from Online Taxman. And if you have kids, depending on your income, you're entitled to up to $1,000 per child for qualifying children under 17, thanks to the Child Credit, says Rosen. (If you're married filing jointly and earn more than $110,000 as a household, you'll lose a fraction of the credit.) If your child is younger than 13 and attends daycare or has a nanny, or if your child attends private kindergarten, you may qualify for a credit of up to $6,000 for two or more qualifying children depending on your earned income. However, there has to be a government record of the person or business you pay for childcare, notes Villamena. So you don't get the credit if you leave the kids with Grandma-unless you're paying Grandma on the books-or give the teen babysitter next door $50 to watch TV while your toddler sleeps.
Lost Your Job
It's essential to keep track of your income while you're out of work. If you earn money between jobs doing freelance or consulting work, you might not get a 1099 form, which means it's up to you to report the income. When you're working for yourself, you can deduct any business expenses you incur, says Nash. For example, you can take a deduction if you bought a new computer, software, or other office equipment (fax machines, printers, etc.); office supplies (notebooks, envelopes, stamps, etc.) are covered here, too. And if you're searching for a job in the same field, don't forget to deduct employment agency fees, resume preparation costs, the cost of travel to and from interviews, and so on. If you opted to sign on for COBRA with out-of-pocket dollars after losing your job, you'll earn a deduction for COBRA premiums as long as your combined medical expenses total more than 7.5 percent of your adjusted gross income, says Kathy Pickering, executive director of The Tax Institute.
Sent Junior off to College
Thanks to the American Opportunity Credit, parents with college-age children can earn a credit of up to $2,500 per student for the first four years of college for money spent on tuition, fees and books. Notes Rosen: The credit is phased out for higher-income taxpayers; the "phase-out range"-currently $160,000 to $180,000 for married couples filing jointly-is adjusted annually for inflation. If your child takes more than four years to graduate undergrad or decides move on to graduate school once she does graduate, you can take a $2,000 credit per family for money spent on tuition and fees as part of the Lifetime Learning Credit. The credit is also phased out for higher-income taxpayers.
Original article appeared on WomansDay.com
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