Personal Tax Deductions
To minimize your tax liability you should explore all your deduction options. Some of the most overlooked personal tax deductions include
- Student loan interest – you can deduct u to $2,500 in student loan interest payment per year, for the lifetime of the loan (income limitations apply). This Student Loan Interest Deduction was made permanent by the fiscal cliff tax legislation passed in January 2013.
- Education expenses – you may deduct up to $4,000 (depending on your income) for tuition related expenses, or you may qualify for the American Opportunity Tax Credit , worth up to $2,500 or the Lifetime Learning credit, worth up to $2,000 which are also for education expenses. Tax legislation passed in January 2013 extended the deduction through 2013 and the tax credit through the end of 2017.
- Job expenses – you can deduct education and training costs for your job if your employer doesn’t reimburse you for them (and if the education is for your current job, not to get a better job later). Job hunting expenses, including mileage, are also deductible. If you are a teacher, don’t forget to include teaching related expenses for a small tax break.
- 401(k) and IRA contributions – if your employer offers a 401(k) it pays to maximize your contributions, especially if your employer matches them. The maximum contribution is $17,500 for 2013. If you are 50 or older, you can contribute an extra $5,500 per year for 2013.
- Child care expenses – if you pay day care expenses for your children or disables adult dependents you may be eligible for a federal tax credit of up to 35% of the cost. To qualify for the child and dependent care credit, you must have a dependent child age 12 or younger or a dependent of any age who cannot care for themselves.
- Medical expenses – you can deduct the amount of your medical and dental expenses that exceed 10% of your adjusted gross income. Eligible expenses include both health insurance premiums and out of pocket expenses not covered by insurance for both you and your dependents.
- Health savings accounts – If you have a qualified Health Savings Account (HAS), you can deduct your contributions to the account, and you don’t have to pay tax on any interest you earn from the account. To establish an HAS account, you must have a high deductible health plan that qualifies under the HAS rules. You can use money in your HAS account to pay almost any kind of health related expense.