Don’t Miss These 3 Common Tax Deductions!
YES YOU CAN – get a real tax refund this year. But you have to know how to play the game, and that means going for every possible deduction that makes sense for you. Here’s what to look out for to get the most out of your taxes this year:
- Child and Dependent Care Credit. The most common way to claim the Child and Dependent Care Credit is to use it for day care expenses for kids younger than 12. But young children aren’t the only individuals who can help you qualify for the credit; there’s also the “Dependent Care” part. If you live with an elderly parent or a disabled spouse and need to hire someone to help with their care while you work, you may be able to claim the credit as well. If you send your kids to summer camp specifically so you can work, you might also be able to claim this credit. Just remember that it has to be day camp, not overnight camp, and you’ll likely need to have your employer verify your work schedule to make this claim.
- Job expenses. If you have job expenses that exceed 2% of your income, you can add them to your itemized deductions. This might include gas for getting around to meet clients; office supplies; or printing/copying fees. No, you can’t deduct everything, like the cost of your daily lunch. But uniforms, safety equipment, even professional dues to a trade organization are fair game. And if you’re on the hunt for a new job, many of the costs associated with your search are deductible, too—whether or not you land the new gig.
- Education tax incentives. It might feel like as a college student the government is out to get you, but come tax time Uncle Sam actually offers some pretty great tax love. The three main tax incentives for college students and their families include:
- American Opportunity Tax Credit: Will likely give you the most money back. Up to 40% of the credit is refundable, meaning you can get cash back even if you don’t owe taxes, and you can get a credit of up to $2,500 for four years for each eligible student.
- Lifetime Learning Credit: Gives you a dollar-for-dollar reduction on your taxes due. But unlike the American Opportunity Tax Credit, it isn’t refundable; so if the credit is more than your tax liability, you don’t get any of the extra amount refunded to you. The Lifetime Learning Credit can also be used on education-related expenses like textbooks and other class materials.
- Tuition and Fees Deduction: You can deduct up to $4,000 in expenses each year for this one. Unlike the credits, this deduction cannot be applied toward expenses you pay for a dependent. You can only claim it for your and your spouse’s tuition and fees.
P.S. You can only claim one of these incentives each year, so do your homework to see which will offer the most bang for your buck!
Just remember that when that refund comes back, it’s not free money by way of a present from the IRS—it’s your hard-earned money coming back to you.