Take Advantage Of Six Over-Looked Tax Breaks

There is no need to cheat on your income taxes because the U.S. tax code offers very generous tax deductions and credits. By taking advantage of each one for which you qualify will save money.

Here is a list of tax breaks that you may have overlooked. If you aren’t sure you qualify, be sure to discuss it with a tax professional.

1. Job hunting

If you were one of the millions of people out of work last year, don’t forget that you can deduct the costs of looking for a new job. For example, you can write off food, lodging and transportation if your search took you out of town. Cab fares, employment agency fees, even the cost of printing and mailing resumes are deductible when looking for a new job. Just make sure you have receipts for everything.

2. Moving expenses

Did you move last year to start a new job? If so, moving expenses are deductible. To qualify, the job just be at least 50 miles from your previous place of residence. If you qualify, you can deduct the cost of getting your and your stuff to your new home, including 16.5 cents a mile for driving your own vehicle. You can also deduct parking expenses and tolls.

3. Other taxes

Don’t forget to deduct the other taxes you paid last year. The biggest chunk will probably be state income taxes and there, you have to remember that any state tax refund you received will count as income, somewhat diluting that deduction.

However, don’t forget real estate taxes or personal property taxes on cars, trucks, boats and other vehicles. If your state doesn’t have an income tax, you are allowed to deduct state sales tax you paid during the year, just as long as you can document it.

4. Child care expenses

A tax credit, which is better than a deduction, might be available if you paid for child care last year. The cost of the qualifying child care can be subtracted from the amount of tax owed, instead of subtracted from your gross income, like a deduction.

5. Points

If you purchased a home last year, you might be eligible for the homebuyers’ tax credit. Even if you aren’t, you can deduct any points paid to your mortgage company. However, if you refinanced an existing mortgage, the points deduction is taken over the life of the loan, providing a much smaller tax break.

6. Making work pay

For younger taxpayers especially, the Making Work Pay Tax Credit is often overlooked. By claiming the credit on your 2010 return, qualifying taxpayers can get a credit equal to 6.2 percent of their earned income, capped at $400 for individuals and $800 for couples. The credit starts to phase out for singles at $75,000 of adjusted gross income and disappears at $95,000. For couples, the range is $150,000 to $190,000.