Making Work Pay Credit
Use schedule M to claim this credit equal to 6.2% of your earned income, capped at $400 or $800. This credit gets phased out as your income increases past $75,000.00.
Many people pay their daycare costs (up to $5,000.00) through a reimbursement account from work. However, up to $6,000 (care for two or more children) can qualify for the credit. Do not forget the $1,000 of additional expenses if you are eligible, as that can cut your tax bill by at least $200.00.
Energy-Saving Home Improvement Credits
You can claim a tax credit up to $1500.00 equal to a fixed dollar amount or percentage of the cost of energy-saving home improvements which include windows, outside doors, high-efficiency furnaces, central air conditioners, and water heaters. There are additional credits for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.
American Opportunity Credit
This maximum tax credit of $2,500 is available for college tuition and related expenses paid during the year. This credit phases out beginning at $80,000.00 of income.
Student-Loan Interest Paid by Parents
If parents pay a child’s student loans, the child gets a deduction for paying the student loan interest. The amount you can deduct varies basedon income, but the maximum amount one can deduct is $2500.00. The parents cannot get the interest deduction because they were not liable on the child’s debt.
Out-of-Pocket Charitable Contributions
Keep track of all charitable gifts you made during the year, by check or payroll deduction. The little things add up and you can write off out-of-pocket costs incurred while doing good works. For example, ingredients for food you prepare for a non-profit organization’s soup kitchen and stamps bought for your school’s fundraising mailing count as a charitable contributions. You need to keep your receipts. Charities need to give you a receipt if your contribution exceeds $250.
Keep track of your job-hunting expenses for the same line of work. If you itemize, you can count your job-hunting costs as miscellaneous expenses, to the extent that the total of your total miscellaneous itemized deductions exceed 2% of your adjusted gross income. Job-hunting expenses include:
- Food, lodging and transportation for overnights
- Employment agency fees
- Costs of printing resumes, postage, and advertising
Points from Refinancing Your Home
When you refinance your home, you can deduct the points over the life of the loan. If you sell the home, or pay it off, you can deduct all of the undeducted points. There are rules that change this deduction when using the same lender.
If you move more than fifty miles away from your residence for a new job, you can deduct your moving expenses, whether you itemize or not. These expenses not only include the moving truck, but also mileage, parking, and tolls.
Health Insurance Deduction to Reduce Self-Employment Tax
You can deduct the cost of those health insurance premiums in calculating self-employment tax on Schedule SE on line 3. Since the write-off does not have a separate line, it’s easy for self-employed individuals to miss.