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ICFE eNEWS #14-03 - March 28th 2014

10 Credits And Deductions Commonly Missed

I recently watched a couple of TV shows where people used metal detectors to uncover "buried treasure." One show focused on buried meteorites, the other on Civil War artifacts. Although many of the unearthed "treasures" were not valuable, it only took one profitable "hit" to keep the "prospectors" motivated enough to continue searching.

Reading this article by CPA Stacy Johnson, CEO and Editor of MoneyTalkNews, can be similar to that experience. He shares ten common credits and deductions that are often missed while preparing our taxes. You may already know all ten, but if there is just one that you are not familiar with, you may have discovered "buried treasure" that will save you money!

  1. Charity. You can deduct the value of any cash or property donations to a legitimate charity, although you'll need receipts. That's common knowledge, but here's something that isn't: Volunteers can deduct 14 cents per mile traveled to and from charity work, plus out-of-pocket expenses from that work, including supplies and required uniforms. (Your time isn't deductible.) For more details, check out Publication 526, the IRS Guide to Charitable Contributions.

  2. Child care. The Child and Dependent Care Credit helps cover the cost of day care (20 to 35 percent, depending on income), but many people aren't aware it also extends to the cost of summer day camps (but not overnight-stay camps), adult dependent care and even housekeeping. Restrictions apply, but it's worth checking out. For this one, you'll want to look to IRS Publication 503.
    And remember, a credit is worth a lot more than a deduction, because a credit reduces your taxes dollar for dollar, whereas a deduction only reduces the income you're taxed on. For example, if you're in the 25 percent tax bracket, a dollar of deduction reduces your tax by 25 cents. But a dollar of credit reduces your taxes by a full dollar.

  3. Retirement. Retirement contributions often qualify for a deduction (which reduces your taxable income) but they can also net you a credit if you make under $27,750 a year for single taxpayers and $55,500 for joint filers.
    It's called the Retirement Savings Contribution Credit or Savers Credit, and if you made contributions to an IRA, 401(k) or other qualified retirement plan, you may be eligible for a credit of up to $1,000 single or $2,000 joint. The less income you make, the bigger the credit.
    If you've moved at least 50 miles for a job, you may be able to deduct moving expenses. But if you're actively seeking work, many other costs are deductible, too - employment agency fees, resume preparation, business cards, travel (at 56.5 cents per mile) and other expenses.
    But there are catches. It has to be for work in the same field, and it's only for those who itemize. To see what you can qualify for, you can check Publication 521. But a quick way to determine if your moving expenses will be deductible is to use this IRS worksheet.

  4. School. Knowledge is power and lower taxes. The American Opportunity Credit is the best way to lower taxes because it's partially refundable, meaning you can theoretically get more money back than you paid in. You'll get the credit for the full amount of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000, so the max is $2,500. Income limits apply. It starts phasing out for single taxpayers with a modified adjusted gross income of more than $80,000, $160,000 for joint filers.
    The American Opportunity Credit is only available for the first four years of college. If you go beyond that, look to the Lifetime Learning Credit. It's up to $2,000 -- 20 percent of the first $10,000 in qualifying expenses - and is available for as many years as you qualify. It also includes graduate classes and job training courses.
    Income limits apply to this one as well. For 2013, the credit starts phasing out for single taxpayers with more than $53,000 of modified adjusted gross income, and joint filers with $107,000 of MAGI.
    Make too much to qualify for either credit? You can still deduct qualified expenses under the Tuition and Fees Deduction. It can reduce your taxes by up to $4,000. Read about all the education credits and deductions here. But remember, you can't take them all, just the one that will give you the biggest write-off.

  5. Military service. If you're in the Reserves and traveled more than 100 miles last year for training or other duties, you can deduct hotel stays, half your meal costs, and travel expenses (parking, tolls, mileage at 56.5 cents per mile). No need to itemize. The IRS has other tax tips for service members - for instance, pay from any month you spent in a combat zone is not taxable.

  6. Medical expenses. Because of income limitations, medical expenses are tough to deduct. But do the math if you had big bills last year. Expenses totaling more than 10 percent of your adjusted gross income (7.5 percent if you were born before 1949) will reduce your taxable income.
    There are a lot of qualifying medical expenses to include, like insurance premiums (including what you pay into an employer plan) and travel to and from treatments.
    The self-employed can deduct their whole insurance premium as long as they made a net profit for the year and aren't covered by another employer (including through your spouse).

  7. Energy efficiency. For several years now, there have been some juicy credits for installing qualifying energy savers, like new windows and insulation. But it looks like tax year 2013 will be the last year. You get a credit of 10 percent of the cost of certain energy-saving improvements for 2013, but it has a lifetime limit of $500, and only $200 of that can be for windows. Read more at this page of the IRS site.
    There's still one great credit left, however. If you installed something that uses alternative energy, like a solar water heater, geothermal heat pump or wind turbines, you can get a credit of up to 30 percent of the cost. That's good until 2016.

  8. Baggage fees. If you're self-employed and travel for business, you know that your travel expenses are deductible. But if you got nailed for a baggage fee at the ticket counter last year, that's deductible too.

  9. State sales taxes. You may have heard that the deduction for state sales taxes was slated to expire. It was, but was reinstated. You're allowed to deduct either state sales taxes or state income taxes, whichever helps most. If you're lucky enough to live in a state without state income taxes, easy decision: Deduct your sales taxes. But even if you do pay state income tax, you should still compare, especially if you bought a big-ticket item last year, like a car.

The IRS has a handy calculator to see how much you can deduct.

Source: MoneyTalkNews.com, Stacy Johnson, February 26, 2014. To sign up for Stacy's Newsletter, go to https://email.moneytalksnews.com/signup/

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Sent by:

Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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Copyright ©  1997 - by Paul S. Richard
and the Institute of Consumer Financial Education, All Rights Reserved.
View our
Privacy Policy Our Terms and Conditions

Institute of Consumer Financial Education
PO Box 34070
San Diego, Ca 92163
Paul S. Richard, Executive Director
Phone 619-239-1401

FAX 619-923-3284

Questions for www.financial-education-icfe.org Click to go to Website Contact Us or 
Website Design Donated by Desgn School Programs