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Mar 12

Save Your Money: Six Government Tax Credits You May Miss

Tax CreditsEach year, tax season rolls around and, inevitably, taxpayers fail to claim all of the possible government tax credits that could help them avoid making a payment to the IRS on April 15. If you avoid these missteps, you can be one of the taxpayers savvy enough not to leave money on the table.

1. Charitable Non Cash Contributions

Most taxpayers are probably familiar with the fact that cash donations to charity are tax deductible, but many well-meaning people may not know that clothes they donate to Goodwill or the Salvation Army are a deduction as well. While you might be tempted to calculate the cost and number of items you dropped into that bin in the shopping center parking lot, remember that if you are audited, the IRS will insist upon a receipt from the group receiving the donation. Without it, you will get no deduction.

2. Health Insurance Premiums

If you pay a health insurance premium, even including Medicare or long term care, you could potentially deduct those expenses. These premiums may be added to your total medical expenses, and they could push your overall medical expenses to a point they exceed 7.5% of your adjusted gross income. If that is the case, you now have a deduction for anything above and beyond 7.5%. Even better, if you are self-employed and pay for your own health insurance (rather than using a spouse’s employer-paid plan), those premiums are fully deductible.

3. Points for Refinancing

Many homeowners have chosen to refinance their mortgages. Any points you pay during the current tax seasons, can be deducted on a monthly basis over the life of your new loan. If you have unauthorized points of an old refinancing that you have never claimed in your taxes before, you may also include them in your current tax return.

4. Educator Supplies

Educators receive a deduction for the cost of the materials they buy for their classrooms. Itemization is not required for this deduction, but while the educator may even be an aide, principal or assistant, they must teach grade school: kindergarten through 12th grade.

5. Higher Education

Once again, tax law shows the government’s support for education in various higher education tax credits. The American Opportunity Tax Credit may assist students for the first four years of their undergraduate work, and the Lifetime Learning Credit includes not only undergraduate but even postgraduate courses. For those students who do not qualify for either credit, up to $4,000 in education expenses may be deducted.

6. Certain Financial Expenses.

Under the miscellaneous itemized expenses, expenses for tax planning and investment could potentially lead to a refund. Like medical expenses, there is a floor which they must exceed, this time two percent of your adjusted gross income, before you may deduct them, but sometimes these costs can add up to your tax time benefit.
You may qualify for all or just some of these potential deductions, and some of them may seem father small on their own, but such deductions can add up to reduce what you owe the IRS or increase your potential refund.

Information credited to ADP.com.

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