3/13/2013 6:45 PM ET|
7 tax breaks you don't want to miss
Recover from disaster. Many people are underinsured, and disasters as widespread as Superstorm Sandy or as local as a house fire or burglary can leave victims facing huge bills. Uncle Sam feels your pain and offers the chance to write off such casualty and theft losses. If you had insurance, you must have filed a claim, and you can't deduct any expenses that were reimbursed.
If your loss was from a federally declared disaster, you get an additional potential benefit. You're allowed to amend the previous year's tax return to include your casualty loss deduction. That can get you a refund in the same year you experienced the disaster. Otherwise, you can claim it the next year. For more information, read Publication 547.
Get credit for working. This is a refundable credit, which means you can get money back even if you don't owe any federal taxes. The credit was designed to provide an incentive to work for low- and moderate-income families. The maximum credit ranges from $475 for low-income people with no kids to $5,891 for families with three or more children.
The big problem with the Earned Income Tax Credit is that it can be mind-numbingly complex to figure out if you qualify.
"I'm just shocked that people don't know they can take it," said Jennifer MacMillan, an enrolled agent in Santa Barbara, Calif. "But people take a look at that (IRS) worksheet and say, 'nope.' "
To get the credit, your earned income and your AGI in 2012 have to be less than certain amounts:
- If you have three or more qualifying children, your earned income and your AGI must be less than $45,060 for singles or $50,270 married filing jointly
- If you have two or more qualifying children, the limits are $41,952 for singles or $47,162 married filing jointly
- With one qualifying child, the limits are $36,920 or $42,130 married filing jointly
- No kids? Your AGI and earned income must be under $13,980 single, $19,190 married filing jointly
The IRS has an "EITC Assistant" that can help you determine if you qualify. Tax preparation software or a tax pro can assist you with the calculations, as well.
Get help with education costs. There is both a credit and a deduction that can help offset the costs of higher education, but you can only use one, so choose wisely.
First, check out the American Opportunity Tax Credit, which can reduce your taxes by as much as $2,500 per undergraduate. Unlike other education credits, this one applies to all qualifying educational expenses, including tuition, books, materials and supplies, Jeanguenat says.
"Although this credit is not new or unknown, I think it is one of the best credits out there right now, and was just extended through 2017," Jeanguenat said. "Up to 40% of the credit is refundable, meaning that it will apply first to any tax, and then any credit remaining will be refunded. (That's) a pretty good return on your investment."
The American Opportunity credit applies to all four years of undergraduate college education. The credit is gradually reduced (or "phased out") for income from $80,000 to $90,000 (or $160,000 to $180,000 for joint filers).
Another tax break to explore is the Lifetime Learning Credit, which offers up to $2,000 per tax return and includes graduate as well as undergraduate education. The student needn't be full time.
"You can take a golf class at a community college and get a credit for 20% of the cost," MacMillan noted.
If you don't qualify for either, you may still be able to deduct up to $4,000 if your AGI isn't more than $80,000 ($160,000 for a joint return). The education credit is an above-the-line deduction, so you don't have to itemize to get it.
Publication 970, Tax Benefits for Education, has all the details.
More from Liz Weston:
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Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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They forgot the #1 tax break of all. Black, Unemployed, 8 kids and no plans on getting a job.
Have you seen how hard it is to get the medical deduction tax break? It's nearly impossible. Medical expenses have to be nearly catastrophic before anything is allowed. Two years in a row I had over the 7.5% and could NOT write off any part of it. Most of it was because I couldn't itemize. I couldn't because I didn't have any children or a mortgage to itemize. So it looks as though I was penalized for being debt free. If they want to help with health care, then make it easier to write off the legitimate expenses. I wish I had saved it but I read an article recently that even said that the ability to write off medical expenses was so complex that very few people can write off much if anything. What a waste of tax codes if less than 1% can use even part of it. Obamacare will raise the level to 10% soon which will probably knock off even more that may be eligible. Washington has no idea how to help. But then again they are very good at selling you something that you will probably never be able to use. Kind of like telling someone the value of heated seats for their car but they live in the tropics. Sounds good but it's only costing the consumer while someone else benefits.
Last year I had very high medical out-of-pocket expenses so I was able to claim over $6,000.00 because I had three surgeries among other expenses. This was the first year I was able to claim it which helped me tremendously. I doubt that I will ever be able to claim this deduction again. And to think that it will increase from 7.5% to 10%. Go figure. My guess is that the government just wants us to keep paying more.
"Get credit for working. This is a refundable credit, which means you can get money back even if you don't owe any federal taxes. The credit was designed to provide an incentive to work for low- and moderate-income families."
An *incentive to work* for low- and moderate-income families?! Why are we paying them to have low to moderate income?! How about providing for your family is incentive enough?
I think our tax system, if we are to have one, needs to be revised so that those who leech off the system pay more in taxes and those who take care of themselves pay little to no taxes. Too many people (typically the leechers or liberals) argue that some people don't pay their "fair share" while ignoring the fact that far too many are leeching off of a system that shouldn't exist.
"Incentive to work..." That's what's wrong with America, this mentality that I should get paid extra for getting a job that doesn't even provide enough for me/my family. Just disgusting...
buy the time you drive to work at gas prices now days and insurance and and keep you truck on the road with tires and repairs, and then eat pay bills , you in the hole and
we do with out alot of stuff because of the price of things now days,
and when i dont get to have my coffee in the morn, im going to be one grumpy old man ,
yea i know there is places you can get free stuff , ill tell ya , i am not there yet , but almost ,
i really dont no how these kids now days are doing this , what hurt me was i dont work that second job ,
and really i dont i am getting old and lazy i think , so i will not work 2 jobs now i am wopped ****,
no vacation in 10 years , used to work 7 days a week , now only 6 , well you all be good,
like that other guys said bury your money , now i no why my grandpa did back in the 30's , now i understand , he had to hide the extra wheat in the top of the barn to keep them snoopy people that came around to make sure you didnt have more then you needed , i for got what he called them , but s.o,b was in there i member that
Think of all the unemployed public servants complaining to Congress if it set up a simple percentage rate for everybody, repeat everybody, including the upper 2 per centers.
Where is the Tea Party when it makes sense?
Maybe most of them are the 2 per centers.
All the legal valid current International Yugoslavian Dinara YUM / YUO / YUR/ YUN money subjected to U.S. IRS 11 % Foreign Taxes ( FT ) . Courtesy : OFAC - Office of foreign assets control of U.S.A.
The old gold standard global cash EEU ' s YUM / YUO / YUR / YUG / YUN Yugoslavia Dinara (s) ,Narodna Banks valued cash bills banknotes including of 1989 valid thru 1996 up to the current world allowable legal limit of 500 Billion denominated banknotes at par value and current are 11 % taxable by the U.S. IRS without any redenomination ( illegal and disallowed ) of the banknotes.
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