Don’t Forget These 5 Tax Breaks

I’m finishing up my taxes and want to make sure I don’t overlook any tax breaks I’m entitled to. What are the breaks that people often miss?

With the tax-filing deadline coming up very soon, I’m still getting a lot of questions from people about potential tax breaks. Before you file, see if you’re eligible for the following deductions and tax credits.

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Tax breaks for college costs. The American Opportunity tax credit can lower your tax bill by up to $2,500 if you spend at least $4,000 in tuition, required fees, books and course materials for the year. It applies to the first four years of postsecondary education. To qualify, your modified adjusted gross income must be less than $160,000 if you are married filing jointly, or $80,000 if you are single (the credit phases out completely at $180,000 for married couples, or $90,000 for single filers). The Lifetime Learning Credit applies to all years of postsecondary education (including graduate school) and can lower your tax bill by up to $2,000 per return. To qualify for the full credit, your modified adjusted gross income must be less than $100,000 if you are married filing jointly or $50,000 if you are single. The size of the credit phases out until your income reaches $120,000 if you are married filing jointly or $60,000 if single.

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Extra credit for saving. If you contributed to a traditional or Roth IRA, a 401(k) or another retirement savings plan, you may qualify for the retirement savers’ tax credit, which can reduce your tax bill by up to $1,000 per person. To claim the savers’ credit for 2011, your adjusted gross income must be $28,250 or less if you’re single; $42,375 or less if you file your tax return as head of household; or $56,500 or less if you are married filing jointly.

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Credit for child care. If you have kids under age 13 and pay for care while you work, you could qualify for the child-care tax credit. You can count up to $3,000 in child-care expenses for one child, or up to $6,000 for two or more children. The size of the credit gradually shrinks as your income increases. Families who earn less than $15,000 can claim a credit for 35% of qualifying expenses; families who earn more than $43,000 can get a credit for 20% of eligible costs. Expenses that count toward the credit include day care, preschool, before-school and after-school care, summer day camp, and a nanny or other babysitter. You may also be able to take a credit worth up to $200 if you’ve maxed out the money from your flexible-spending account to pay for child care and you have two or more children and spent more than $6,000 on their care. See IRS Publication 503 Child and Dependent Care Expenses.

Out-of-pocket charitable deductions. Most people remember to deduct checks they paid to charity if they itemize. But you can also deduct the expenses you incurred in helping out a charity, such as the cost of ingredients for a dish for a soup kitchen, stamps for a mailing, copying, and car mileage (14 cents a mile). And don’t forget to count any money you’ve had transferred automatically from your paychecks to charity.

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Moving expenses. If you move because of a job, you may be able to deduct your moving expenses even if you don’t itemize. To qualify, you must be moving to a job at least 50 miles farther from your old home than your old job. You can write off the cost of hiring movers (or renting a moving truck) plus the cost of one-way travel to your new home for everyone in your household. Deductible expenses include airfare, train costs, or car mileage (for 2011, 19 cents a mile from January through June and 23.5 cents a mile from July through December). For more information see IRS Publication 521, Moving Expenses.