It’s tax time! And if you want to get the most from Uncle Sam, there are certain credits and deductions you shouldn’t leave on the table. Whether you are a single mom, business owner, newlywed or a college student, these tips may help boost your tax refund this tax season.
Tip #1 Bad Debt Expense
Does Cousin Pete owe you money? Deduct it on your tax return! This can get a little sticky especially if you are expected to see him at the next family reunion. If you tried over and over again to get your money back, the Internal Revenue Service (IRS) will allow you to take a nonbusiness bad debt deduction on your tax return.
A nonbusiness bad debt is a debt that is not in connection with a taxpayer’s trade or business on the tax return. For more information, see Publication 550, Investment Income and Expenses.
Tip #2 – IRA Deduction
Looking to save a little for retirement? Well, consider stashing some cash away in a traditional individual retirement account (IRA). An IRA is a great tool to save for retirement and also provides for a great tax deduction. The best thing is – if you didn’t get a chance to open an IRA before December 31, the IRS will allow you to contribute up to the tax deadline, which is April 15. So there is still time to take advantage of this tax deduction.
Generally, the amount you can deduct is the lesser of $5,000 ($6,000 if you are 50 or older) or your taxable compensation.
Tip #3 – Moving Expenses
Starting a new job or pursuing a self-employment opportunity? You may be able to deduct some or all of your moving expenses. Qualified moving expenses include airfare or mileage and the cost of packing and transporting household goods. If your relocation is at least 50 miles from your former home to your new place of work and you expect to work there for a while than you may be able deduct these expenses on your tax return. For more information, visit IRS’ Tax Topics – Moving Expenses.
Tip #4 – Charity
In the giving spirit? Why not allow Uncle Sam give something back to you?
Charitable contributions can be in the form of both cash and property. These donations require a record of substantiation such as a bank record or statement from the charitable organization. Non-cash donations should be deducted at fair market value, typically the cost it can be sold for in a thrift store.
In addition, if you incur car expenses directly related to giving charitable services. You can deduct actual expenses for gas or oil, or deduct 14 cents (2012) per mile for each mile driven. So whether you are donating goods to Red Cross or donating your time at the Boys and Girls Club, your transportation costs may help to reduce your tax liability.
But more importantly, keep in mind; your time donated is not deductible.
Tip #5 American Opportunity Credit
Furthering your education? The IRS will grant you a tax credit to somewhat ease the burden for the first four years of postsecondary education through the American Opportunity Credit. Qualified expenses include tuition, fees, equipment, supplies and course materials incurred during the taxable year. The best thing about this credit it is refundable up to $1,000! So even if you did not have any federal income tax withheld, you may still be able to obtain a tax refund up to $1,000.
Kemberley Washington is a certified public accountant and a business professor at Dillard University. Subscribe to her blog at Kemberley.com for more personal finance and tax tips. Follow her on Twitter or connect with her on Linkedin.