By Kay Bell
Bankrate.com
To make sure your IRS bill is as low as possible, you need to take every tax deduction, credit or other income adjustment you can. Here are 10 tax breaks - some for itemizers only, others that any filer can claim - that often get overlooked but that could save you some tax dollars.
1. Additional charitable gifts. Everyone remembers to count the monetary gifts they make to their favorite charities. But expenses incurred while doing charitable work often aren't counted on tax returns.
You can't deduct the value of your time spent volunteering, but if you buy supplies for a group, the cost of that material is deductible. Similarly, if you wear a uniform in doing your good deeds, for example as a hospital volunteer or youth group leader, the costs of that apparel and any cleaning bills also can be counted as charitable donations.
So can the use of your vehicle for charitable purposes, such as delivering meals to the homebound in your community or taking the Scout troop on an outing. The IRS will let you deduct that travel at 14 cents per mile.
2. Moving expenses. Most taxpayers know that they can write off many moving expenses when they relocate to take another job. But what about your first job? Yes, the IRS allows this write-off then, too. A recent college graduate who gets a first job at a distance from where he or she has been living is eligible for this tax break.
3. Job hunting costs. While college students can't deduct the costs of hunting for that new job across the country, already-employed workers can. Costs associated with looking for a new job in your present occupation, including fees for resume preparation and employment of outplacement agencies, are deductible as long as you itemize. The one downside here is that these costs, along with other miscellaneous itemized expenses, must exceed 2 percent of your adjusted gross income before they produce any tax savings. But the phone calls, employment agency fees and resume printing costs might be enough to get you over that income threshold.
4. Military reservists' travel expenses. Members of the military reserve forces and National Guard who travel more than 100 miles and stay overnight for the training exercises can deduct related expenses. This includes the cost of lodging and half the cost of meals. If you drive to the training, be sure to track your miles. You can deduct them on your 2009 return at 55 cents per mile, along with any parking or toll fees for driving your own car. You get this deduction whether or not you itemize, but you will have to fill out Form 2106.
5. Child, and more, care credit. Millions of parents claim the Child and Dependent Care Credit each year to help cover the costs of after-school day care while mom and dad work. But some parents overlook claiming the tax credit for child care costs during the summer. This tax break also applies to summer day camp costs. The key here is that the camp is a day-only getaway that supervises the child while the parents work. You can't claim overnight camp costs.
Remember, too, the dual nature of the credit's name: child and dependent. If you have an adult dependent who needs care so that you can work, those expenses can be claimed under this tax credit.
6. Mortgage refi points. When you buy a house, you get to deduct the points paid on the loan on your tax return for that year of purchase. But if you refinance your home loan, you might be able to deduct those points, too, as long as you use refinanced mortgage proceeds to improve your principal residence.
7. Many medical costs. Taxpayers who itemize deductions know how difficult it often is to reach the 7.5 percent of adjusted gross income threshold required before you can claim any medical expenses. It might be easier to clear that earnings hurdle if you don't overlook miscellaneous medical costs. Some of these include travel expenses to and from medial treatments, insurance premiums you pay for from already-taxed income and even alcohol- or drug-abuse treatments.
Self-employed taxpayers who are not covered by any other employer-paid plan, for example, one carried by a spouse, can deduct 100 percent of health insurance premiums as an above-the-line adjustment at the bottom of Page 1 of Form 1040.
8. Retirement tax savings. The Retirement Savings Contribution Credit was created to give moderate- and low-income taxpayers an incentive to save. When you contribute to a retirement account, either an IRA (traditional or Roth) or a workplace plan, you can get a tax savings for up to 50 percent of the first $2,000 you put into such accounts. This means you get a $1,000 tax credit, which is a tax break that directly reduces dollar for dollar any tax you owe.
9. Educational expenses. The Internal Revenue Code offers many tax-saving options for individuals who want to further their educations. The tuition and fees deduction can help you 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. And the new American Opportunity Credit, which for 2009 and 2010 replaces in most cases the Hope credit, offers a dollar-for-dollar tax break of up to $2,500.
10. Energy-efficient home improvements. Tax law changes in 2009 mean that homeowners who make energy-efficient improvements to their residences can claim a possible credit of up to $1,500. This covers such relatively simple things as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems. If you made any qualifying energy improvements, be sure to claim them by filing Form 5695. If you didn't, you get another chance in 2010.
Some of these tax breaks can save some filers a nice chunk of tax money. With others, the savings might be relatively small. But when it comes to taxes, every bit of savings helps. So make sure you don't overlook any of these possible tax breaks as you finish up your 2009 return.
Editor's Note: Kay Bell writes on tax matters for Bankrate.com.
In November, Kay was appointed to a three-year term on the Taxpayer Advocacy Panel, a federal advisory committee established under the authority of the Department of the Treasury to work with the IRS in finding ways to improve the tax agency's customer service.
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