The Tax Benefits that Boost Your Tax Refund
June 10 2016
Taxes can be cringe-worthy…until you realize there are tax benefits that will boost your refund enough for a new pair of shoes. Tax benefits encompass both deductions and credits; the former reduces your taxable income while the latter lowers your tax bill dollar for dollar. Find below the list of the best tax reducers and refund boosters.
Moving Expenses
If you move to a new town for a new job or your company relocates you, the expenses incurred can be deducted. The IRS is even more generous – you can still deduct moving expenses if you’re self employed or if you’re fired from the job you moved for. The two things taken into consideration are distance and time. Your new job must be 50 miles farther than your old commute. If you’re self-employed and work from home, you only need to move 50 miles away. As for time, you must be employed for at least 39 weeks of the next 12 months after the move, or 78 weeks of the next 24 months if you’re self-employed. So what can you deduct? Packing, shipping, 30 days of storage, travel (including gas), hotel rooms, and disconnecting/reconnecting utilities. The best thing? You don’t have to itemize these deductions.
Biggest Benefit: No limit – it’s true!
Medical Expenses
If your medical expenses exceed 7.5% of your adjusted gross income, they become deductions to be itemized. For example, if your AGI is $40,000, you can deduct expenses after the first $3,000. You may feel like you won’t be able to take these deductions if you’re a relatively healthy person, but many don’t know that these expenses reach beyond a typical doctor’s visit. Other than out of pocket expenses for visits and medication, you can deduct expenses pertaining to acupuncture, chiropractors, and pretty much any practice that involves someone who can prescribe medically necessary treatments. Travel counts (24 cents per mile), including to conferences about your medical conditions, and things like AA meetings.
Credits
Credits are extremely helpful for, and are targeted to, low to moderate income earners. After $40,000, credit eligibility lowers and taxpayers turn to deductions. The following credits are the big boosters, while other popular credits are valued at $1,000 to $2,000.
Since 1975, the Earned Income Tax Credit has been one of the most substantial tax credits available. This credit is determined by income and phased in according to filing status. Eligibility and credit amount is based on adjusted gross income, invested income, and earned income. Marrying filing separately and self-employed income do not qualify; you must be 25 to 65 years of age.
Biggest Benefit: $6,242, if filing with three qualifying children
The Child and Dependent Care Credit helps relieve parents of the piling costs of babysitting and daycare. Those that must leave children under 13 in others’ care to work or look for work qualify. This credit is also available relieving cost for those that have a spouse or any dependent who is physically or mentally incapable of self-care.
Biggest Benefit: Up to $6,000, for two qualifying children/people
Maybe all of these tax benefits don’t apply, or haven’t until now. Ensure that when you’re filing your taxes, you parse through every small expense – you could be missing out on boosting your refund with the above.
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