File Taxes: Tax Deductions & Credits Information
When many people file taxes, they often overlook numerous tax deductions and credits that could save them money. Yet that doesn't have to be the case if you have this handy cheat sheet with the most ignored tax deductions and credits the IRS offers when you file taxes.
Making It Work Credit
This temporary tax credit is only in effect for 2010 when you file taxes. It is worth up to 6.2% of your earned income, with the maximum credit being $400. Depending on your income, filing status, and other claimed credits, the Making it Work credit amount may be reduced.
Paying student loans? Going back to school? There's an IRS tax deduction for that! You can deduct up to $4000 per student for tuition and fees, and up to $2,500 for interest paid on student loans when you file taxes this year.
There are always restrictions for the kind of students that can claim the interest on their loans as a deductible, so you should know these guidelines to avoid any problems with the IRS later after you file taxes.
- If you are married, you cannot file taxes separately from your spouse.
- You cannot be a dependent on someone else's taxes. File for yourself!
- You have to be the person obligated to pay the student loan back, not your parents, relatives, etc.
- Your student loan is in repayment and you have actually paid the interest. Accumulation of interest on your balance is not deductible when you file taxes.
Cannot be Combined with Any Other Offer
During the same year you file taxes, you can claim the Student Loan Interest Deduction with the Hope Scholarship and Lifetime Learning Tax Credits. However, when you file taxes, deducting the interest twice, if it qualifies for more than one deduction, is prohibited.
Though volunteering time, sweat, and effort isn't deductible (and it should be), charitable donations via payroll deductions, receipts from cash donations, and other forms of payment are all deductible when you file taxes.
You should also include the mileage you rack up driving to your favorite charity in your taxes. File the sitter you hired to watch your children while you're away on your IRS returns as well. Remember, this can all be deducted from your tax liability when it comes time to file taxes.
Earned Income Credit
The Earned Income Credit is one of the IRS' most valuable benefit programs when you file taxes. It helps working class individuals and families receive a bigger tax return. The eligibility for the EITC program is based on the number of eligible children, income, and filing status you provide when you file taxes.
The IRS states 4 out of 5 eligible taxpayers claimed EITC last year, adding an average of $2,200 to their tax return. Also, with the signing of the American Recovery and Reinvestment Act, there is a temporary increase in the EITC benefits that apply when you file taxes for the 2010 tax year.
Claiming Your Parents as Dependents
Taking care of our parents' medical bills can get expensive, and the IRS knows that. That is why you are able to deduct those expenses on your taxes. File those expenses only if you can prove you provide 50% or more of the financial support for your parents.
When it's time to finally file taxes, you should be aware of the deductible charity work you do and the assistance you provide to your parents. If you are in school, there are many educational credits that will lower your tax liability but you have to file taxes with these credits in order to receive the benefits of your hard work.
At IRS Tax Settlement HQ, we want everyone to get a large refund after they file taxes, yet we know this isn't possible. If you are left with a tax debt after you file taxes for this year or past years, Call Us Now or Fill Out the Form. We have a network of tax attorneys, enrolled agents, and tax preparers who can assist you in resolving your IRS tax debt. Contact us today if you have a large tax debt after you file taxes.