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Are You Overlooking Tax Deductions?

Posted by Diane H. Blackwelder, CFP on 22 February 2010 | 0 Comments

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Missing a tax deduction or credit you are entitled to can cost you.  Here is a list of a few tax deductions you could easily overlook:

  1. Property-tax deduction for non-itemizers:  For tax year 2008 and 2009, you can boost your standard-deduction amount - by $500 for Single Filers and $1000 for married and filing a joint return - to account for property taxes paid on your residence. There is some extra paperwork involved - you will need to file a Schedule L.
  2. Sales-tax deduction for new vehicles:  If you purchased a new car, truck, motorcycle or motor home after February 16, 2009 and before the end of the year 2009, you may be able to deduct the sales tax paid (up to a maximum purchase price of $49,500).  The deduction can be claimed as an itemized deduction or on Schedule L if you use the standard deduction. The deduction phases out for married couples with AGI's over $250,000 and single filers with AGI over $125,000.
  3. The Hope Credit (known as the American Opportunity Credit for 2009 and 2010):  The Hope Credit has traditionally been available only for the first 2 years of undergraduate school.  For 2009, the credit has been expanded to include the first four years of college and it will rebate up to $2500 each qualifying student.  Of course, there are income limitations to qualify.  Click here for more information.
  4. Child-care Credit:  A credit is much better than a deduction; it reduces your tax bill dollar for dollar.  If you are using a flexible spending account at work to reimburse your child-care bills, it is easy to overlook the child-care credit. Up to $5000 in expenses can be paid through a tax-favored account through an employer plan.  If you pay for care for 2 more children, up to $6000 can qualify for the credit. So, if you expense the maximum ($5000) through a plan at work, but spend even more for work-related child care, you can claim the credit on as much as $1000 of additional expenses.  That could cut your tax bill by at least $200.

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