| If you don't know about a possible tax break, you | | | | Check if you qualify for the Hope and Lifetime |
| won't use it. Here are the deductions that many | | | | Learning credits. The Hope credit is worth as |
| taxpayers often forget. How many times have | | | | much as $1,800 per student in 2008 and 2009. |
| you done your taxes and, a few weeks later, | | | | The Lifetime Learning credit is worth as much as |
| discovered you had overlooked the chance for a | | | | $2,000 per return. Compare the credit with the |
| deduction? Many times, surely. How can you not | | | | deduction, and go with the one which gives you |
| leave out these deductions the next time? Start | | | | the biggest benefit. And, if you don't qualify for |
| preparing now! | | | | either credit, you may be able to deduct up to |
| Here are 10 very commonly missed deductions | | | | $4,000 in education expenses in 2008 and 2009. |
| that can impact your tax bill for 2008 and your | | | | 7 - Clean fuel credit Credits are great since they |
| tax planning for 2009. | | | | are a dollar-for-dollar reduction in tax. And if you |
| 1 - Noncash contributions | | | | purchased a new hybrid gas-electric auto or truck |
| Charity, as we hope everyone recalls, begins with | | | | in 2008, you can take a conservation tax credit |
| a tax deduction. If you didn't have the cash to | | | | of between $250 and $1,000 and an further fuel |
| give in 2008, let's hope you charged it. And, | | | | economy credit of between $400 and $2,400, |
| likewise, if you don't have the cash when it | | | | dependent on the make and the fuel economy. A |
| comes time to contribute in 2009, charge it. The | | | | hybrid car combines an electric motor with a gas |
| deduction is permitted in the year of the charge, | | | | fueled internal combustion engine. |
| not when you actually pay the bill. | | | | But move quickly. The credit begins to phase out |
| Get a receipt from any charity to which you | | | | when the auto manufacturer sells its 60,000th |
| gave a contribution, and, if you're still concerned | | | | hybrid vehicle. That's the total per manufacturer, |
| about documentation, get the credit card | | | | not 60,000 per model. Once the cap is hit, the |
| company to mail you their record of the | | | | phaseout starts at the start of the second |
| transaction. | | | | subsequent calendar quarter. |
| Let's assume you emptied your closets and gave | | | | You can't get a credit anymore on a Toyota |
| everything to Goodwill or a similar charity. The | | | | Prius, and credits were to run out Honda Civics on |
| value of your donated items -- clothes, furniture, | | | | Dec. 31, 2008. A number of cars still qualify, |
| etc. -- is deductible. Obtain a written receipt. With | | | | including models from Ford, Chevrolet, Mazda, |
| noncash charitable donations, the rule is easy: No | | | | Saturn, Nissan and Volkswagen. |
| receipt means no tax deduction if you get audited. | | | | Once 60,000 cars are sold, buyers over the next |
| Clothes and household items must be in good or | | | | two quarters can claim just half the credit. In the |
| better condition to get the deduction. | | | | six months after that, 25% of the full credit. |
| If you've already dropped your old clothes in a | | | | After that, nothing. You acquire the deduction in |
| Salvation Army box and walked away without a | | | | the year you start using the car, and you must |
| receipt, take the deduction anyway. You've | | | | be the original owner. Take the deduction on |
| legitimately made the donation. You simply may | | | | Form 1040 by writing in "clean fuel." |
| not be able to prove it in an audit. Beginning with | | | | Consumers must do more legwork to understand |
| 2007 returns, the law has required a receipt or | | | | what sort of tax savings they might get if |
| some kind of written verification for all charitable | | | | they're purchasing a particular hybrid car or truck. |
| contributions. Feel lucky? Play the audit lottery. | | | | Check with a dealer or tax preparer. |
| You're still an honest person. | | | | 8 - Investment and tax expenses Many people |
| If you are able to, reconstruct as much as you | | | | forget tax planning and investment expenses |
| can the list of items you donated and then work | | | | because they're part of miscellaneous itemized |
| out their market value. The simplest way is to go | | | | expenses. Their total must exceed 2% of your |
| to a thrift store and check prices there. And then, | | | | adjusted gross income before you get any tax |
| naturally, when you make the contribution, get | | | | break. |
| that receipt. | | | | Expenses to track include your employee business |
| 2 - New points on refinancing With interest rates | | | | expenses, tax preparation fees and even the part |
| so low over the past couple of years -- even in | | | | of your legal or accounting fees related to tax |
| 2008 and unquestionably in 2009 -- tons of homes | | | | planning. For instance, in a divorce, the legal time |
| have been refinanced, occasionally more than | | | | spent bearing on the tax aspects of alimony and |
| once. | | | | child support would qualify. As would the tax |
| Any points you pay to refinance your home can | | | | aspects of estate planning. |
| be deducted on a monthly basis over the life of | | | | A lot of people short themselves on the |
| the new loan. So, if you refinanced your | | | | deduction of investment expenses. They |
| mortgage on June 1, 2008, for a 20-year term, | | | | remember the safety deposit box fees. But what |
| seven out of 240 months will have elapsed after | | | | about the annual fee paid to your broker and any |
| Dec. 31. If you paid $2,400 in points, you can | | | | IRA fees you pay directly? You may remember |
| write off $70 ($10 a month for seven months) | | | | the cost of your investment publications on |
| for 2008. You can write off $120 for 2009 and | | | | subscription -- such as Forbes, Fortune, |
| each year thereafter until the points have been | | | | BusinessWeek, Worth and Barron's. But how |
| deducted in total. The sum may not be large, but | | | | about the investment newspapers you purchase |
| every little bit helps. | | | | off the newsstands? You keep track of your |
| 3 - Old points on refinancing This is one deduction | | | | long-distance phone calls to your broker and |
| many people overlook. All unamortized points on | | | | investment advisor, but how about the gas |
| an old refinancing can be deducted in the year of | | | | mileage to go meet them? |
| a new refinancing. | | | | 9 - Casualty deductions Last year bestowed |
| So, let's assume you refinanced on June 1, 2007, | | | | forest and range fires aplenty, and everybody |
| and paid $2,400 in points. You refinanced once | | | | recalls Hurricanes Katrina and Rita, which ravaged |
| more on June 1, 2008. You will be able to deduct | | | | the Gulf Coast in 2005 and Hurricane Ike, which |
| all the unexhausted points on the 2007 loan on | | | | hit Texas and Louisiana in 2008. |
| your 2008 return. That's $2,280 plus the $50 you | | | | If President Bush declared your area a disaster |
| could deduct for January through May 2008. | | | | area, you can claim your loss either on your 2008 |
| Similarly, if you refinance the 2008 loan in 2009 (if | | | | return or your 2007 return. You can confirm |
| interest rates remain low and a lender still likes | | | | whether you qualify on the Federal Emergency |
| you), you can write off the remaining balance on | | | | Management Agency's Web site. |
| your 2009 return. | | | | Compare your 2007 return with what you |
| 4 - Health insurance premiums Any health | | | | anticipate filing for 2008 and figure out what year |
| insurance premiums you pay, including some | | | | fetches you more money. You also should receive |
| long-term-care premiums based on your age, are | | | | interest back to April 15, 2007. Unless your |
| potentially deductible. You have to add these, | | | | income for 2008 was substantially less than 2007, |
| however, to your medical expense pile. Medical | | | | it's probably better to take the deduction in 2008. |
| expenses must exceed 7.5% of your adjusted | | | | If you do qualify for a refund for 2007, you'll |
| gross income (AGI) before they bring you any | | | | want to file a revised 2007 tax return. For that, |
| tax break. | | | | you will need Form 1040X. |
| But if you are self-employed and not covered by | | | | 10 - Retirement tax credit This one also can |
| any other employer-paid plan, you can deduct | | | | come with a deduction. This credit is fashioned to |
| 100% your health insurance premiums "above the | | | | give moderate- and low-income taxpayers a |
| line." Above the line means the expense is included | | | | motivator to save for retirement. Make a |
| in adjusted gross income and doesn't get lumped | | | | contribution into your retirement account. That |
| in with itemized deductions. That means that you | | | | money isn't taxed presently. So, it's like you |
| not only do not have to exceed the 7.5% floor, | | | | acquired a deduction off your income. In addition, |
| you don't even need to itemize! | | | | you get a credit of as much as 50% of the first |
| 5 - Educator expenses If you're a qualified | | | | $2,000 invested. That's as much as a $1,000 |
| educator, you are able to get an above-the-line | | | | reduction in your tax. |
| deduction of as much as $250 for supplies you | | | | You receive the $1,000 tax reduction in addition |
| bought in 2008 and may buy in 2009. That | | | | to the $2,000 reduction in your income. That's a |
| includes books, supplies and even computer | | | | good rate of return on a $2,000 investment. |
| equipment. | | | | Furthermore, if you qualify, you can deduct as |
| You qualify if you're a kindergarten through grade | | | | much as $4,000 in contributions to an IRA. The |
| 12 teacher, aide, instructor or principal. | | | | tax credit goes away as your adjusted gross |
| Congress extended the law through 2009, and will | | | | income increases. But singles with AGIs up to |
| likely renew the break for 2010. | | | | $25,000 and joint filers with AGIs up to $50,000 |
| The alternative minimum tax was in the beginning | | | | will qualify. The limit is $37,500 for heads of |
| designated to ensure high-earning Americans paid | | | | households. |
| their fair portion of income taxes. But it hasn't | | | | Contributions to your 401(k), 403(b), SEP, |
| been considerably altered over the years and | | | | traditional or even Roth IRAs will qualify also. |
| ensnares more and more middle-class people. | | | | Guess-Free Tax Guide was established to take |
| 6 - Student higher education expenses For 2008 | | | | the guesswork out of the average consumer's |
| and 2009, if your adjusted gross income isn't | | | | annual puzzle of which online tax software to use, |
| higher than $65,000 ($130,000 on a joint return), | | | | what the "hidden deductions" are this year, how |
| you can take an above-the-line deduction of as | | | | to save money in these troubling times, and just |
| much as $4,000 for any higher-education | | | | as important how to avoid an audit. |
| expenses you paid. | | | | |