– Casualty Loss: If you were a victim of damage caused by a sudden and unexpected natural disaster, like a roof collapsing due to heavy snow, you could qualify for a casualty loss deduction. However, if damage is caused from something happening gradually, such as water seepage in a basement, you would not qualify.
– Volunteer expenses: Not only are charitable donations of money and goods to a qualified charitable organization tax-deductible, if you spend money out-of-pocket in the course of performing volunteer duties, you are entitled to some modest tax deductions.
– Deduction for a bad investment: While the IRS won’t give you back the money you lost in an investment, the government will let you take a deduction for the loss. By showing that a stock had value at the beginning of the year but not at the end of the year, you may qualify for a deduction. Similarly, if you learn your investment became worthless in a prior year, file an amended tax return for that year to claim a refund. Although usually you have just three years to file an amended return, in the case of worthless investments, you have up to seven years from the date your original return was due to claim a deduction.
Child and Dependent Care Credits
The most common tax credits have to do with children and there are two main credits. First is the child tax credit, which gives you a credit for qualifying children you take care of. The credit is $1,000 per qualifying child, and you must meet income requirements.
In addition to the child tax credit there is also a credit for child care expenses. Depending on your situation there are many qualifiers and limits to what can be claimed, but any time you have children these are credits worth looking into.
Finally, there is an adoption tax credit as well. This credit is meant to help ease the financial burden of going through the adoption process. This credit can be as high as $13,360 per child.
Elderly and Disabled Credit
Once you reach age 65, or if you are on permanent disability, there are a few tax credits available. Unfortunately, these credits have very low income limits, so they aren’t available to many.
Going green has its benefits beyond just helping the environment. There are tax credits available on anything from buying Energy Star appliances to a hybrid vehicle. These credits vary greatly depending on what you buy, but you can typically get up to a 10 percent credit of the purchase price on qualifying energy efficient appliances and home improvements, up to a maximum of $500. That’s not too bad if you need to replace an old appliance anyway.
Earned Income Tax Credit
Another popular tax credit for lower income filers is the earned income tax credit, or EITC. If you have earned income that falls below certain limits (based on how you file and family size) you may be entitled to this credit. Families with children really benefit from this credit and may receive a credit anywhere from a few thousand to over five thousand dollars.
Here is a tax credit that often gets overlooked. The saver’s credit helps low to moderate-income filers to save for retirement. This credit is worth up to $1,000 ($2,000 for married filing jointly) for those contributing to a qualifying retirement plan such as a 401k or IRA. As if the credit isn’t enough, keep in mind that contributions made to some retirement plans also count as tax deductions, so you’re basically double-dipping in the tax savings. It makes saving for retirement a no-brainer.
– Start-up costs: Business and organizational costs are capital expenses and typically cannot be deducted all in one year. However, taxpayers may elect to deduct up to $5,000 in business start-up costs and $5,000 in organizational costs. These costs are amounts paid to create an active trade, business, investigate the creation, or acquisition of a business.
– Shaping up: The IRS does not offer deductions for gym memberships, extreme workout DVDs, or Pilates machines. But if your doctor tells you that your life is dependent on a healthier lifestyle, you could be an exception to the rule. Your doctor needs to vouch for your condition, but once he or she does, almost anything that you used to lose weight, lower cholesterol, or cure what’s ailing you can be eligible