No question. Today’s tax laws are complicated. Many individuals are confused about which credits and deductions they can claim on the 2016 return. Even if you use professional tax preparation services, it’s a good idea to be familiar with the types of tax breaks for which you many be eligible.
You can make your tax planning and preparation more efficient if you are aware of the records you need to save throughout the year. Here are five tax breaks that you should know about:
1. State and Local Taxes
The PATH ACT of 2015 gives taxpayers a deduction on their 2016 returns for one of two state taxes - either state income tax paid or state sales tax paid - whichever is greater.
2. Child and Dependent Care Tax Credit
The popular tax credit for daycare for young children is widely used by eligible families. That same credit can be applied to older school aged kids' before and after school care as well as summer and vacation day camps. Another significant benefit of this tax credit is for the home health aide care needed for a spouse or other dependent--such as an elderly parent--who is physically or mentally unable to care for him or herself.
3. Job Search Expenses
If you have significant job search expenses - more than two percent of your adjusted gross income (AGI) - they may be 100 percent deductible. The deduction is available whether you are gainfully employed or not currently working--as long as you are looking for a position in your current profession. Unfortunately, you cannot deduct job search expenses if you are looking for a job for the first time.
4. Student Loan Interest Paid by Parents
A student who is not claimed as a dependent can deduct the interest on college student loans that are repaid by parents. That money is treated by the IRS as if the child paid it. A deduction of up to $2,500 can be claimed even if the student does not itemize.
5. Medical Expenses
Medical expenses are deductible as long as they are more than 10 percent of Adjusted Gross Income (AGI) for the tax year 2016. What many people don't realize is which medical expenses can be deducted. Ask your CPA for a complete list of deductible medical expenses.
Don't be hesitant about the fee for using tax preparation services to prepare your return. You will actually be saving money when they help you identify tax write-offs and other tax saving strategies.
Are you interested in learning more about income tax services in Washington DC or another location? We offer accounting services for the local Washington DC area, as well as virtual services that are available for people anywhere in the United States. Contact us to learn more: (202) 789-8898