The Illinois CPA Society Explains How You May Benefit
Now that tax season is underway and returns are being prepared, it’s easy to overlook a potential tax credit or deduction that could make a big difference in your refund, including these:
Child and Dependent Care Tax Credit changes – The child tax credit doubles to $2,000 per child for daughters and sons who are 16-years-old or younger. In addition, a new $500 tax credit is now available for older children or dependents. The new $500 credit may also be claimed for older relatives cared for at your home. The income levels at which the credit phases out have been increased significantly.
Earned Income Tax Credit (EITC) – It’s available to supplement wages for low-to-moderate income workers. However, millions of “middle class” taxpayers who are also eligible for this refundable tax credit don’t claim it. The IRS estimates 25 percent of taxpayers who could claim this credit leave it on the table. The EITC may apply for those who lost a job in the previous year, had a reduction in pay or worked fewer hours. Furthermore, eligible taxpayers may file an EITC claim for up to three previous tax years.
Refinanced mortgage points deduction – If you refinanced your mortgage, you may deduct the cost of points paid over the life of the loan. For a refinanced 30-year mortgage, a homeowner may deduct 1/30th of the points each year or $33 for every $1,000 worth of points. Points paid in connection with the purchase of a home are deductible in the year paid.
Out-of-pocket charitable contributions – For charitable contributions of cash or goods, donors usually get a receipt. But for smaller contributions, such as online disaster relief donations or contributing a few dollars for a local cause at the grocery store checkout – it’s easy to lose track of those records and small donations can add up. Keep track of all contributions that may count as tax deductions, including buying ingredients to prepare food for a charity or providing transportation.
Medicare premium deductions for those self-employed – If you qualify for Medicare health coverage (usually for those 65 or older who are also eligible to receive Social Security) and run your own business, then some additional Medicare premium costs can be taken as tax deductions. Premiums paid for supplemental coverage, such as Medicare Part B, Part D, Medicare Medigap policies or the cost of a Medicare Advantage plan may be deductible.
Baggage fees for those self-employed – If you run your own business and travel for work, added fees for things such as checked bags, online reservation bookings or changing flights may qualify as deductible business travel expenses.
Deducting state taxes paid – If you owed state taxes for 2017, remember to include that amount with your state tax deductions on your 2018 return. You must itemize your taxes instead of taking the standard deduction. Beginning for 2018 tax year filings, itemized state and local tax deductions are capped at $10,000.
Military reservists travel expenses – An exception to the suspension of the moving expense deduction applies to those in the National Guard or military reserves. Members may deduct lodging costs, half the cost of meals and may also receive mileage credit for driving their own cars more than 100 miles from home to military assignments requiring an overnight stay.