Tax Tips & Calculators
- Commonly overlooked tax deductions and tax credits include the Earned Income Credit, Child Tax Credit, Saver's Credit, medical expenses, moving expenses, state and local taxes, charitable donations, job expenses and self-employment deductions.
- Nearly 4.1 million people fail to claim education tax benefits, including the Hope Credit, Lifetime Learning Credit, Tuition and Fees Deduction, Student Loan Interest Deduction, and the Exclusion for Savings Bond Interest.
- File an amended tax return to claim missed deductions and credits within 3 years.
Earned Income Credit (EIC)The EIC is designed to offset the burden of Social Security taxes for low-income workers. You can claim this tax credit even if you have no tax liability.
You may qualify for the EIC if your earned income and adjusted gross income are less than:
- $13,440 ($18,440 if Married Filing Jointly) with no qualifying children.
- $35,463 ($40,463 if Married Filing Jointly) with 1 qualifying child.
- $40,295 ($45,295 if Married Filing Jointly) with 2 qualifying children
- $43,279 ($48,279 if Married Filing Jointly) with more than 2 qualifying children.
Child Tax CreditYou can claim $1,000 for each child. The 2009 Child Tax Credit begins to phase out when your AGI is more than these limits:
- $75,000 if Single, Head of Household or Qualifying Widow(er)
- $110,000 if Married Filing Jointly
- $55,000 if Married Filing Separately
If your income tax is reduced to zero and your earned income is more than $3,000 (for 2009), you may be eligible to claim the additional Child Tax Credit.
Saver's CreditIf you qualify, you could get a tax credit for up to half of what you contribute to a qualified retirement plan or IRA. Claim the Saver's Credit if you meet all the qualifications:
- You're age 18 or older.
- You aren't a full-time student.
- You aren't claimed as a dependent on someone else's return.
- Your AGI doesn't exceed $27,750 ($55,500 if Married Filing Jointly, or $41,625 for Head of Household).
Education Tax BenefitsEven if you don't itemize your tax deductions, you could save money with these education credits and deductions.
- American Opportunity Credit or Hope Credit — You can claim either the American Opportunity Credit or the Hope Credit. The American Opportunity Credit is equal to 100% of the first $2,000 and 25% of the next $2,000 per student for tuition and related fees, with a credit maximum of $2,500 per student. It's restricted to the first 4 years of college and can be claimed only 4 times per student. Up to $1,000 of the credit may be refundable. It generally will be advantageous to claim the Hope Credit only if a student is attending an education institution in a Midwestern disaster area. The credit for these students is equal to 100% of the first $2,400 and 50% of the next $2,400 per student for tuition and related fees, with a credit maximum of $3,600 per student. However, if you choose to claim the Hope credit, you must use it for all students and the credit for students not attending a school in a Midwestern disaster area is only 100% of the first $1,200 and 50% of the next $1,200 per student for tuition and related fees, with a credit maximum of $1,800 per student. In addition, the Hope credit can't be used for a student if you've already claimed it for that student more than once.
- Lifetime Learning Credit — A credit of 20% of your annual tuition and related fees, with a credit maximum of $2,000 per return. The tax credit may be claimed for an unlimited number of years.
- Tuition and Fees Deduction — You can deduct up to $4,000 per student for tuition and fees.
- Student Loan Interest Deduction — Deduct up to $2,500 per return for interest paid on student loans.
- Exclusion for Savings Bond Interest — Some or all of the interest received from eligible bonds issued after 1989 may be excludable if qualified higher education expenses for the year are at least as much as the proceeds of the redeemed bonds.
Note: You can't use the same expenses to claim more than 1 of the above benefits, and other restrictions apply.
Medical ExpensesIf you spend more than 7.5% of your adjusted gross income on medical expenses, such as insurance (but not your pre-tax premiums), prescriptions, other out-of-pocket expenses, and mileage to and from medical facilities, then you may deduct the amount that exceeds that figure. Keep in mind, you must itemize income tax deductions to claim medical deductions.
Moving ExpensesEven if you don't itemize income tax deductions, you could deduct moving-related expenses. Your move must meet the following qualifications:
- Your move must be job-related.
- Your new job would have increased your commute by more than 50 miles if you hadn't moved.
- You must be employed full time for at least 39 weeks during the 12 months after you move. If you're self-employed, the applicable figures are 78 weeks and 24 months, respectively, and at least 39 of the weeks must be in the first 12 months.
- Your moving expenses can't be reimbursed by your employer.
State & Local TaxesIf you itemize income tax deductions, you have the option of claiming your state and local sales tax or state and local income tax for the year. Be sure to determine which amount will be larger, because you can't claim both.
If you choose to deduct income tax, include your withholding and estimated tax payments for the current year as well as any balance due from a prior year. If you credited an overpayment from last year's tax return to his year's estimated tax payment, be sure to include that amount too. You can deduct the state or local sales or excise tax on a new motor vehicle purchased after Feb. 16, 2009 and before Jan. 1, 2010. If you are not itemizing deductions, add this amount to your standard deduction. If you are itemizing deductions and are claiming the deduction for state and local income tax, enter the deduction on Schedule A, line 7. If your adjusted gross income (AGI) is $135,000 or more ($260,000 or more if you are Married Filing Jointly), you can't claim the deduction. If the purchase price of the motor vehicle is more than $49,500, you can deduct only the tax attributable to the first $49,500 of the purchase price. If you're subject to Alternative Minimum Tax (AMT) and have a state tax refund, it may be better for you to claim the sales tax deduction even if it's smaller than the income tax deduction.
If you choose to deduct sales tax, you can deduct either the actual amount you paid or the amount from the table in the Schedule A instructions. You can add to the amount in the table the sales tax you pay on a car as well as other items specified in the instructions.
Charitable DonationsIf you itemize income tax deductions, you may deduct your charitable donations. You'll want to keep good records or all your donations.
- Money Donations — Receipts are required for all money donations.
- Item Donations — Give new or used goods to charity and deduct their fair market value. Special rules apply to donations of vehicles and to donations of appreciated property (property that is worth more than you paid for it).
- Volunteering — Deduct 14¢ per mile while driving for charity. You can also deduct other out-of-pocket expenses.
Out-of-pocket Job ExpensesKeep track of job expenses not reimbursed by your employer. You could deduct these costs:
- Driving expenses (the non-commuting kind)
- Travel expenses
- Union dues
- Continuing education expenses
Self-employment Tax DeductionsIf you're self-employed, you could qualify for additional income tax deductions. If you work out of your home, there are even more opportunities to claim your expenses. Here are a few examples:
- Deduct half of your self-employment tax.
- The Section 179 Deduction generally allows you to write off up to $250,000 of business property other than real estate purchased in 2009. Higher limits may apply.
- If you use a part of your home exclusively and regularly for business, you can deduct the business portion of rent, mortgage interest, real estate taxes, utilities, insurance and repairs.
- You can establish a retirement plan that may allow you to make contributions that exceed the amount you can contribute to a traditional IRA or Roth IRA. This deduction is not allowed for self-employment tax purposes.
AMT CreditIf you were subject to the AMT in a prior year and you're not subject to the AMT this year, you may be eligible to claim the minimum tax credit. Up to 50% of the amount carried to 2009 from years before 2007 may be refundable.
Claiming Overpaid TaxesIf you're eligible for any of the above tax credits, the IRS allows you to reclaim your lost money by filing an amended tax return for prior years. However, you generally can file an amended return only for up to the past 3 years.
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Related IRS Forms & Publications
- Schedule A (Form 1040) - Itemized Deductions
- Schedule A (Form 1040) Instructions
- Form 4952 - Investment Interest Expense Deduction
- Form 5129 - Questionnaire - Filing Status, Exemptions and Standard Deduction
- Form 8283 - Non-cash Charitable Contributions
- Form 8283 Instructions
- Publication 501- Exemptions, Standard Deduction and Filing Information
- Publication 502- Medical and Dental Expenses
- Publication 526- Charitable Contributions
- Publication 529- Miscellaneous Deductions
- Publication 936- Home Mortgage Interest Deduction