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Tax Deductions And Credits You Can Take Advantage Of

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420x316-grad-lee Dee Lee
Dee Lee is a Certified Financial Planner who received a diploma in...
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BOSTON (CBS) – Here’s a list of some tax deductions and credits you may be able to take advantage of.

Child Care Credit: You can claim up to $3,000 that you paid someone to care for your child and up to $6,000 for two or more dependents. You must have the provider’s Social Security number.

Health Insurance Premiums: If you are self-employed, 100% of the premiums are deductible. For other tax payers, if you have paid any health insurance premiums last year they become part of your medical expenses and your medical expenses are deductible after they have reached 7.5% of your income. If you are reporting a loss this year in your small business, you will not be able to take the deduction but you can still use the cost of the premiums as a medical deduction.

Long Term Care Insurance Premiums: Part of the cost of the insurance premium will be treated as a medical expense and will be deductible once your medical expenses exceed 7.5% of your income. The older you are the larger the deduction.

The Savers Credit: This credit was formerly referred to as the Retirement Savings Contribution Credit. Congress wanted to encourage lower income wage earners to start saving for retirement so they came up with a tax credit when you contribute to your retirement plan. This tax credit could help you offset the cost of the first $2,000 contributed to an IRA, 401(k) and other retirement plans.

For 2012, you may be able to claim the retirement savings contributions credit if your modified adjusted gross income (AGI) is not more than:

  • $28,750 if your filing status is single
  • $ 57,500 if your filing status is married filing jointly
  • $43,125 if your filing status is head of household

Cash Contributions: Cash is always appreciated but in order to get a deduction you need to document your contribution. Rules require either a bank record that supports the donation (a cancelled check) or a written statement from the charity if the contribution is more than $250 that meets tax-law requirements. So those loose dollars you put in the Salvation Army bucket at Christmas or the church collections can’t be counted as a deduction.

Noncash Contributions: Remember around Christmas when I suggested you take your old stuff to the Salvation Army or Goodwill and get a receipt. Find the receipt. People forget about the noncash contributions they have made during the year. The receipt reminds you that you did donate all of that stuff to the Goodwill. You can no longer claim deductions for used clothing and “household goods” that are not in “good” condition or better. Check the Salvation Army’s website to get a list of a suggested deduction amounts.

Now if you don’t have a receipt and you are audited, the IRS will disallow your contributions. Also often overlooked are the contributions you made with your credit card. Look for those receipts as well.

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