It’s tax preparation time in America. Are you taking advantage of certain deductions and credits that may allow you to decrease your tax bill? Here’s a few:
- Child and Dependent Care Credit: If you (and your spouse, if you are married) work or are looking for work, and your children are younger than age 12 or require before or after-school care, you may qualify for a tax credit of up to 35% of your qualifying expenses. Tuition for private/parochial school is not a qualifying expense, but summer camp may be.
- Unreimbursed Business Expenses: If you travel for work, you need to retain all receipts, because many of these unreimbursed expenses are deductible. If your boss only provides for the cheapest seats available and you splurge for the exit row, that expense may be deductible. The same goes for baggage fees (checked and carry on; thank you, Spirit Airlines) and even certain incidental expenses that you incur on the road, such as the cost of hotel Wi-Fi or tips to hotel employees.
- Purchases for Work: If you own a business, all of your business equipment is a business expense. But some people who are not self-employed forget that uniforms, tools, computer software (including those that allow you to work remotely) are also deductible expenses, if they are unreimbursed from other sources.
- Charitable Giving: Keep track of all of your charitable gifts and donations (such as cash, stock or other property), but also keep track of your mileage if you use your vehicle for charitable purposes (delivering of food to the homeless, for instance).
- Refinanced Mortgage: If you took advantage of the historic low interest rates and refinanced your mortgage, your points may be deductible in some instances.
- Health Care Expenses: For many people, health expenses can be exorbitant and there may be some tax relief for that. The IRS allows taxpayers under age 65 to deduct qualified medical expenses that exceed 10% of AGI (adjusted gross income). For taxpayers over age 65, this threshold is reduced to 7.5% of AGI.
- College Tuition: Depending on your modified AGI, the American Opportunity Tax Credit offers a refundable tax credit for up to $2,500 per eligible student for qualified educational expenses paid for you or your dependent child.
- Tax Preparation: Both accountant and lawyer fees for tax preparation are deductible, as well as tax preparation software expenses if you do your own taxes.
