A post from Heather C., our CMF Finance Coach:
Yay, it’s that time of year again! Who’s as excited as I am to roll up your sleeves, dust off your calculator, and peruse your color-coded, alphabetized receipts and start crackin’ on your taxes? Anyone? Anyone? OK, let’s try that again.
Who’s as excited as I am to keep more of your family’s hard-earned cash in your own bank account rather than give it to the IRS? Do I have a few more takers?
There’s no way around it; tax time is here, and not a single one of us can avoid it. To help you be as prepared as you can be, here are some tax deductions that can get overlooked. Keep this list handy while you’re getting your taxes ready, and you can be certain you won’t be paying Uncle Sam any more than you should.
1. Volunteer Mileage. Did you spend any time this year volunteering at a charitable organization? If so, don’t forget to log those miles so you can deduct them. The IRS allows 14 cents per mile, and it can add up faster than you might think.
2. Childcare expenses while volunteering. Not only can you deduct your mileage, but if you’re paying for childcare so that you may volunteer at a charitable organization, you can deduct those expenses as well.
3. Charitable Donations. Those clothes in my closet I had been “saving” for the day I would fit back into them? I finally admitted that my post-baby bod just wasn’t going to get there, so off to Good Will they went. While accepting my new shape wasn’t easy, I did get a little excited knowing I’d receive a future deduction for giving away some of my favorite duds.
While you might not forget this category entirely, did you remember to include all that mac n’ cheese you gave to your kids’ school charity program? How about those consignment items that didn’t sell, but got donated? Does your paycheck automatically deposit money to United Way each month? Did you give a few bucks to a friend doing the March for Babies walk or make soup for a soup kitchen? List ‘em and deduct ‘em. Just be sure to keep accurate records.
Here’s something worth noting: if your non-cash contributions exceed $500 (which can be pretty easy to do if you have kids who grow out of their clothes as fast as mine do), the IRS requires you to fill out form 8283. Don’t be intimidated by this. I once had someone tell me that she was reluctant to list all her donations because she wasn’t sure how to fill out the extra form. It’s not much more than a description of what you donated, so don’t let this form preclude you from keeping more of your own money.
4. Student Loan Interest Paid by Your Parents. Even if your parents are paying your student loans back for you, you can deduct up to $2500 of the interest on your own return as long as your parents aren’t claiming you as a dependent.
5. Airline Baggage Fees. Gone are the days of checking bags for free. But if you’re traveling for work, and paying out of your own pocket to check your bags, you can deduct this cost. You can only deduct the amount that exceeds 2% of your Adjusted Gross Income (AGI), but by including airline baggage fees, you just might push your deductions over that amount.
6. Job Search Expenses. In this economy, many of us have incurred these expenses. Keep in mind that if you’ve lost your job and are looking for a job in the same line of work (i.e., you can’t write off expenses for searching for your first job), you can deduct the costs of your job search. Expenses include, but are not limited to, the cost of cab fares, printing, postage and even lodging and transportation if you’ve had to seek employment in another city. These expenses must also exceed 2% of your AGI; if they do, you can deduct the amount that’s over the 2%.
7. Refinancing Points. With interest rates as low as they are, many people are refinancing their homes. If you refinanced last year, you can deduct any points you might have paid over the life of the loan. (If you purchased a home last year and paid points, you can deduct the full amount this year.)
8. Residential Energy Credit. This one is actually a credit (credits are better than deductions). Here’s the gist of it: if you made energy-efficient improvements to your home in 2011, you can receive a credit for 10% of what you paid. Improvements include, but are not limited to new insulation, new exterior doors, a new roof, and new windows. For a list of purchases that qualify, visit Energy Star’s website. There’s one caveat to this credit: it maxes out at $500, and you may not take the credit if you received $500 or more in similar credits offered in 2006, 2007, 2009, or 2010.
There’s more good news for the procrastinators out there. This year, April 15th falls on a Sunday, and the 16th is Emancipation Day, a District of Columbia holiday. That means you have until April 17th to file your taxes. Happy filing! ‘=
Note: There are limitations and phase-outs to just about everything, but the average earner should be able to take advantage of most of the items on this list. For additional information, go to www.irs.gov.
**Have a comment or question for Heather? She’ll be checking our comments and will answer any questions you have!**
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