As the April 15th tax return deadline approaches, consider your eligibility for tax credits and deductions. Why pay more tax than you must? Here are five that are not to be missed.
Job Search Costs
Many people are hunting for a new position but may not realize that what they spend in the search may be deductible from their 2013 tax bill. If that’s you, dig out those receipts for the following:
-Resume preparation, including printing, consultation with a resume expert, stationery, and covers.
-Employment counseling (Someone who helps write a resume, screens potential employers, arranges interviews, etc.)
-Travel expenses (airfare, parking fees, tolls, car mileage)
However, the caveats are these: one, the job seeker must have been looking for a new job in his current field. For example, a nurse must be looking for a nursing job, not a position as a restaurant manager. Two, the Internal Revenue Service frowns on a big gap between losing the old job and looking for a new one. So expenses are deductible if the job search starts promptly.
Work for a not-for-profit, church, school and so on is deductible in terms of your travel expenses and anything you may spend out of pocket for supplies and goods which benefit the organization directly. Again, keep the receipts, and:
-Record your mileage, parking fees and tolls (14 cents per mile can add up.)
-Ask the organization for a letter to document any contribution of goods totally $250 or more.
In the eyes of the IRS, more documentation is best.
Home Office Expenses
IRS Publication 587 details the “Business Use of Your Home.” While you cannot deduct expenses incurred for the space where you write personal monthly bills, you can deduct what is “ordinary and necessary” for a home office. “Ordinary and necessary” includes:
-home owners insurance
-repairs (a fancy new window, no; repair of a broken window, yes)
Save receipts. Enter each legitimate expense in a spreadsheet or log. The deduction will then be based on a formula of office square footage divided by total home square footage.
Child Care Credit
While a tax deduction reduces tax liability, a tax credit is a dollar amount actually lopped off what may be owed. Child care is a credit when:
-the child is 13 or younger
-protection and well-being of the child are provided
-the parent or guardian is working or looking for work
This credit is calculated at a set percentage of the cost of care, depending on adjusted gross income, and it is capped at $3000 per tax year for 1 child and $6,000 for 2.
State Sales Taxes
This deduction is especially helpful where there is no state income tax. Check the IRS website or with your tax professional for tables which relate income to likely state and local sales taxes paid. In other words, the IRS helps you figure what you probably paid in sales tax based on where you live and how much you earn. Tell your preparer about expensive purchases such as a boat or car.
With some foresight, research, and even a little backtracking, taxpayers can document and get every legitimate tax deduction or credit. It is well-worth paying attention.