BOSTON (CBS) – Tax deductions lower your taxable income. Tax credits provide a dollar-for dollar reduction of your income tax liability.
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 10% of your income. If you are over 65 it is still 7.5% of income but goes to 10% for 2017.
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 10% of your income. The older you are the larger the deduction for LTC insurance. Check IRS publication 502.
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 or a written statement from the charity if the contribution is more than $250.
Noncash Contributions: Remember around Christmas when I suggested you take your old stuff to the 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 should not claim deductions for used clothing and “household goods” that are not in “good” condition or better. The Goodwill has a list of suggested deduction amounts.
Often overlooked are the contributions you made with your credit card. Look for those receipts as well. Remember when your friend asked you to support them as they walked for a charity and you sent in a donation using your credit card.
Moving Expenses For A New Job: You can deduct certain moving expenses to a new home because you started or changed your job locations. To qualify your job must be at least 50 miles away from your home. You can deduct the cost of getting you and your household goods to the new area.
The Savers 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. There are income limits.
Earned Income Tax Credit: is a federal income tax credit for workers who don’t earn a high income ($53,505 or less for 2016) and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.
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