It's hard to believe we are going into the home stretch of the 2012 tax season. With not much time left, taxpayers often make mistake, as they begin to scramble to quickly get their taxes done or are not aware of tax deductions and credits and leave money on the table.
Here are eight of the most-missed tax deductions and credits:
1. Dependent exemptions. Exemptions for dependents are $3,800 per dependent, but individuals often don't take it. Why? Because they don't realize their relative they've been supporting or their friend that's been sleeping on the coach may be claimed as a "qualifying relative," which may entitle them to a tax deduction.
2. Earned Income Tax Credit. The Earned Income Tax Credit is for low to middle-income wage earners that has lifted nearly 7 million people out of poverty. However, the IRS estimates 20 percent of eligible workers and their families miss out on this valuable credit. You have to file your taxes to get this tax credit, but oftentimes many think they don't make enough money to file their taxes. Not claiming the Earned Income Tax Credit can cost a family with three dependents a credit worth up to $5,891.
3. Child and Dependent Care Credit. Children can be expensive, but the IRS has some relief. If you work and pay for child care for your dependents under 13 years old, you may be able to qualify for a deduction of up to $2,100. You can even deduct the cost of summer camp. Summer was long ago, but don't forget this tax deduction.
4. State Sales Tax Deduction. You usually get a choice between deducting state income taxes paid or state sales tax, depending on which expense gives you the largest tax deduction. If your state does not have state income taxes, then the option to choose the state sales tax is beneficial to you. Even if you pay state income tax, if you purchased some big ticket items in 2012 you may keep more money in your pocket by choosing to deduct the state sales taxes paid.
5. Charitable donations. You would be surprised how much individuals donate to charity every year without ever thinking about how much money they could save at tax time. Many taxpayers have contributions to charitable organizations deducted from every paycheck, but they forget to include that as a charitable donation when preparing their taxes.
Don't forget about your out-of-pocket expenses while traveling to volunteer at the local soup kitchen. You can deduct 14 cents per mile plus parking and tolls for travel directly related to charity work. Spring and Fall cleaning are a yearly ritual, but we often forget donations of non-cash items like clothing and household goods are tax deductible. Looked at individually, these may seem small, but these tax deductions can add up.
6. Job-search expenses. If you were looking for a new job in 2012, you may be able to deduct costs related to job search, such as the cost of resumes, employment agency fees, postage, and even travel expenses--as long as the expenses are directly related to your job search and the positions you sought were in the same line of work as your previous job.
7. Moving expenses. Even though job-hunting expenses for your first job are not deductible, you can deduct your moving expenses for your first job. Your job must be at least 50 miles away from your old home. If you meet the time and distance test, you can deduct the cost of getting yourself and your household goods to the new area. You can even deduct the cost of moving your pet.
8. Previous State Tax Liability. Did you pay previous state tax liabilities in 2012? The amount paid can be added to the state income taxes withheld from your paycheck for an even larger tax deduction.
Lisa Greene-Lewis, Lead CPA, American Tax & Financial Center at TurboTax, has more than 15 years of experience in tax preparation, including positions as a public auditor, controller, and operations manager. For up-to-date tax tips and tax news, go to the TurboTax Blog, where you can find answers to the most commonly asked tax questions.
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