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What Extra Tax Deductions Should I Make Sure To Take?

Updated for Tax Year 2014


OVERVIEW

The federal government offers tax deductions and credits to reduce taxable income under certain circumstances. There are several that are often overlooked, including deductions for job hunting, caregiver expenses for dependents and children while you work, a credit to reduce taxes for moderate- to low-income earners and the premium tax credit associated with the Affordable Care Act. TurboTax can help determine if you qualify for these credits and deductions.


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Job hunting expenses

Best Extra Tax Deductions To Take

Some of the most overlooked tax deductions are the costs associated with job hunting. Provided this is not your first job, and the job you’re looking for is in the same line of work as your previous one, you can deduct qualifying expenses such as:

  • Mileage and transportation costs, including parking and tolls
  • Cost of printing business cards, resumes, advertising and postage
  • Recruiting and employment agency fees
  • Food and hotel costs

However, you can only deduct these and any other miscellaneous expenses if they exceed 2 percent of your adjusted gross income.

Dependent care tax credit

You can claim a percentage of work-related costs to have a caregiver look after your qualifying child or dependent. This credit is capped at $3,000 for one child or dependent or $6,000 for two or more.

To be eligible for the child and dependent care credit, the dependent must be your child who is 12 years old or under; a mentally or physically incapacitated spouse who lives with you for at least half of the year, or: a mentally or physically incapacitated dependent who resides with you for at least half of the year.

A non-custodial parent is not eligible to be paid as a caregiver. Social Security numbers for all children, dependents and caregivers, along with addresses, must be included on your return.

Earned income tax credit

The earned income tax credit decreases the amount of taxable income for working individuals making a low to moderate income. It may also provide a refund in some circumstances. To qualify for the EITC, all of the following criteria must be met:

  • You, and your spouse, if you file a joint return, must have a valid Social Security number
  • You must be a U.S. resident or a year-round resident alien
  • You must meet the EITC earned income limits
  • You can't file as “married filing separately”
  • You can’t be a qualifying child of another person
  • You must have earned income from working, running a business or a farm
  • You can’t have earned foreign income

You also must have a qualifying child or be between the ages of 25 and 65, living in the United States and not be a dependent of another person. As of publication, the earned income limits range from $14,340 for those with no qualifying children to $51,567 for those married filing jointly with three or more qualifying children.

Opt for the premium tax credit

If you purchase your health insurance from the Marketplace, don’t forget to claim the premium tax credit.

“If you qualify, you can estimate your income and opt to have the credit paid directly to the health insurance provider now,” explains Caroline Thompson, an accountant. “Or, you can wait and receive it at the end of the year.” To qualify for the premium tax credit, you are required to meet all of the following criteria:

  • You must purchase a health plan through the Marketplace
  • You can’t be claimed as another person’s dependent
  • You fall within certain income limits
  • You do not qualify for health insurance from the government or an employer
  • You must file a joint return if you are married

 

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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