Do you know about these 4 tax deductions?
Most filers know about the biggest deductions, such as children or mortgage interest. But there are a few less familiar ones that could help make April 18 a happier day.
—In the deadline for filing your 2016 taxes still more than 60 days away, ample time remains to research the moves that can pare down your bill or, better still, swell the size of your refund. Most filers know about the biggest and most-used deductions, such as those for children or mortgage interest. Here, though, are a few less familiar ones that may help make April 18 a happier day.
Tax Credits for Higher Education Costs
With the hikes in college costs outpacing both inflation and financial aid in recent years, any tax relief to help offset the cost of tuition is more than welcome.
Two federal tax credits -- The Lifetime Learning Credit and the American Opportunity Credit -- promise just such relief. You can claim only one of these credits during any one year, and the former credit can be claimed only once, period.
The Lifetime Learning Credit is for qualified students who want to improve job skills or earn a degree. This credit covers an individual, a spouse, or a dependent, and, as the title implies, can be claimed in only a single tax year. It is worth up to $2,000 or 20% of the first $10,000 in educational expenses for undergraduate, graduate, and professional degree courses. People can claim the full credit “if their modified adjusted gross income is under $55,000 or $110,000 for a married couple filing jointly” notes Joshua Zimmelman, President of Westwood Tax & Consulting LLC. It phases out completely for individuals with over $65,000 and married couples with over $130,000 in modified adjusted gross income.
The American Opportunity Tax Credit offers tax relief of up to $2,500 for tuition and other qualified expenses. It applies to people in the first four years of post-secondary education who do not have a felony drug conviction. Since it is open to individuals with modified adjusted gross incomes of up to $90,000 and married couples with modified adjusted gross incomes of up to $180,000, even upper-middle-class families can take advantage of it. Even if tuition expenses are quite high, as Bob Wheeler, CEO of RWWCPA.com notes, “you can only take one of these tax credits.”
Student Loan Interest
Americans with student loan debt can deduct up to $2,500 worth of interest from their taxes. To gain the full deduction, though, a single person must not make more than $65,000, and no-one can claim him or her as a dependent. There is a smaller deduction available for people who make $65,000 to $80,000 annually. A person who becomes a pharmacist and gets a $100,000 per year job right out of professional school, unfortunately, cannot utilize this deduction at all. However, people can always, “use a percentage of your tax refund towards paying off that loan,” notes Joshua Zimmelman.
Job Hunting Expenses
Job search expenses are deductible if those costs “exceed 2% of your adjusted gross income,” notes Joshua Zimmelman. Travel to and from interviews, resume writing services, and work with a career coach are some of the allowed expenses.
Moving expenses are also deductible for people who relocate more than 50 miles for a new job. This deduction applies for recent graduates and other adults who must move for their careers. “Airfare, mileage, hotels, shipping goods, and U-Haul rental,” are some of the allowed items notes Bob Wheeler.
Fostering Animals and Other Charitable Gifts
Many animal lovers provide foster care to pets. And the care is tax deductible as a charitable gift! People who fostered animals can deduct, “veterinary bills, cost of food, grooming costs, and other necessary pet expenses,” said Joshua Zimmelman.
All charitable contributions, whether for animals or humans, must go to a qualified tax-exempt organization. The IRS and the Better Business Bureau www.give.org have search tools to help people check if their donations are going to qualified organizations. Good works help people lower their tax bills.
This story originally appeared on ValuePenguin.
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