Get Back at the IRS with These Tax Deductions, Breaks and Loopholes

Written by Jason Simpkins
Posted March 19, 2014

It's that time of year again.

If you're like me, and you've put off doing your taxes, we're getting down to crunch time.

So here's some quick advice about how to maximize your tax return...

Job Search

With the economy stuck in stagnation, a lot of people have been changing jobs – or are simply exploring their options.

Well, if you're already employed, you can write off costs related to your job search. That includes the cost of resume preparation, employment agencies, phone calls and interviews. You just have to itemize your expenses.

Furthermore, if you've relocated to take a new job you can write off those moving expenses, too. That also applies to college grads relocating to their first job.

Education

Speaking of college, the Tuition and Fees deduction can take up to $4,000 off your taxable income and is available without having to itemize.

The Lifetime Learning credit could provide some students (or their parents) up to a $2,000 credit.

The American Opportunity tax credit gives a dollar-for-dollar tax break of up to $2,500.

And if your company offers a “Section 127” educational assistance plan, you can receive up to $5,250 in annual tax-free reimbursements for qualified expenses.

Retirement

At the opposite end of the spectrum, you get a tax break for your retirement savings.

When you contribute to a retirement account – either an individual retirement account or a workplace plan – you can get a tax savings of up to 50% of the first $2,000 you put into the account. That's a $1,000 break that directly reduces any tax you owe.

Retirement contributions that are deducted from your salary can also reduce your taxable income and your tax bill. For 2014, the maximum salary-reduction contribution to a company 401(k) plan is $17,500, or $23,000 if you are age 50 or older. That's an especially sweet deal if your employer matches contributions.

Mortgages/Home Improvement

Did you buy a house this past year?

If so, you can deduct the points paid on the loan.

Furthermore, if you refinanced, you might be able to deduct those points, so long as you used the proceeds to improve your house.

Many energy efficiency upgrades are deductible, as well.

The Nonbusiness Energy Property credit, for instance, is worth up to $500.

However, to claim this credit you have to pay attention to specific spending limits. That includes $150 for high-efficiency furnaces and boilers, $300 for air conditioners and heat pumps and $200 for replacement windows.

Also the overall $500 tax credit cap applies to anyone who received any previous energy tax credit since Jan. 1, 2005.

There are breaks if you've sold your home, too.

An unmarried seller can exclude up to $250,000 of gain, and a married joint-filing couple can exclude up to $500,000.

Medical Expenses

If your medical expenses exceed 10% of your adjusted gross income you can deduct them. To get there, you'll probably need to include things like the cost of travel to and from treatment facilities and insurance premiums you pay with already-taxed income. Substance abuse treatments can be included, as well.

Also, if you're self-employed and not covered by an employer-paid plan, you can deduct 100% of health insurance premiums as an adjustment to income.

Childcare

If you pay someone to take care of one or more children under the age of 13 so you can work, you may be eligible for the dependent care credit. The credit equals 20% of qualifying expenses of up to $3,000 for one child, or up to $6,000 of expenses for two or more kids. So the maximum credit for one is $600, and the maximum credit for two or more is $1,200.

This includes after school care, as well as the cost of summer day camp. Only day-only getaways, though. You can't claim overnight camp costs.

Tax Filing

Finally, you can to deduct the cost of preparing your taxes as a miscellaneous itemized deduction.

This includes the cost any tax planning advice, related books or research materials, software filing programs – like H&R Block or TurboTax – and electronic filing fees.

Good filing!

Fight on,

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Jason Simpkins

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Jason Simpkins is an Editor of Wealth Daily and Investment Director of Secret Stock Files, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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