Child and Dependent Care Tax Credit

 

A tax credit is so much better than a tax deduction—it reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that’s subject to tax.

But it’s easy to overlook the child and dependent care credit if you pay your child care bills through a reimbursement account at work. Until a few years ago, the child care credit applied to no more than $4,800 of qualifying expenses. The law allows you to run up to $5,000 of such expenses through a tax-favored reimbursement account at work.

Now, however, up to $6,000 can qualify for the credit, but the old $5,000 limit still applies to reimbursement accounts. So if you run the maximum $5,000 through a plan at work but spend more for work-related child care, you can claim the credit on up to an extra $1,000. That would cut your tax bill by at least $200.

Earned Income Tax Credit (EITC)

Millions of lower-income people miss out on this every year. However, 25% of taxpayers who are eligible for the Earned Income Tax Credit fail to claim it, according to the IRS. Some people miss out on the credit because the rules can be complicated. Others simply aren’t aware that they qualify.

The EITC is a refundable tax credit – not a deduction – ranging from $510 to $6,318 for 2017. The credit is designed to supplement wages for low-to-moderate income workers. But the credit doesn’t just apply to lower income people. Tens of millions of individuals and families previously classified as “middle class” – including many white-collar workers – are now considered “low income” because they:

  • lost a job
  • took a pay cut
  • or worked fewer hours last year

The exact refund you receive depends on your income, marital status and family size. To get a refund from the EITC you must file a tax return, even if you don’t owe any taxes. Moreover, if you were eligible to claim the credit in the past but didn’t, you can file any time during the year to claim an EITC refund for up to three previous tax years.

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State tax you paid last spring

Did you owe taxes when you filed your 2016 state tax return in 2017? Then remember to include that amount with your state tax itemized deduction on your 2017 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.

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Refinancing mortgage points

When you buy a house, you get to deduct points paid to obtain your mortgage all at one time. When you refinance a mortgage, however, you have to deduct the points over the life of the loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage—that’s $33 a year for each $1,000 of points you paid. Doesn’t seem like much, but why throw it away?

Also, in the year you pay off the loan—because you sell the house or refinance again—you get to deduct all the points not yet deducted, unless you refinance with the same lender.

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Jury pay paid to employer

Some employers continue to pay employees’ full salary while they are doing their civic duty, but ask that they turn over their jury fees to the company coffers. The only problem is that the IRS demands that you report those fees as taxable income. If you give the money to your employer you have a right to deduct the amount so you aren’t taxed on money that simply passes through your hands.

Use TurboTax to help ensure you don’t miss any of the deductions or credits you deserve, so you get your biggest refund, guaranteed.

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