Last minute tax deductions that could save you thousands

As April 15, better known as “Tax Day”, draws closer, millions of taxpayers are scurrying to put the final touches on their federal tax return.

But before you click "send", there are various tax deductions that you may have overlooked: 

  1. Fiscal cliff tax credits. The passing of the American Taxpayer Relief Act of 2012 (better known as the “fiscal cliff” legislation of New Year’s Eve), brought about various tax breaks, credits and provisions. For example, did you know that there is a provision that will allow you to set aside pre-tax income retroactively to pay for the public transportation and parking involved in your daily commute?
  2. Retirement savings credit. According to Fidelity.com, making a last-minute contribution to an IRA could save you more than $1,000 on your 2012 tax bill. You can contribute up to $5,000 to an IRA, or $6,000 if you are age 50 or older. Plus, low-income workers who contribute can also claim the saver’s credit, which is applicable to those who earned less than $28,750 for single filers, $43,125 for heads of household, and $57,500 for joint filers.
  3. Child Tax Credit. This credit was scheduled to revert to $500, but thanks to the ATRA, the credit was made $1,000 permanently. The Child Tax Credit allows parents to reduce the federal income taxes owed by up to $1,000 for each qualifying dependent younger than 17.
  4. Student Loan Interest deduction. Those who qualify can deduct up to $2,500 in student loan interest — no itemization necessary! Two additional education tax credits include the Hope Credit and the Lifetime Learning Credit, which can mean a credit of up to $2,500 for qualifying students.
  5. Alternative Minimum Tax patch. Congress passed a fix for the Alternative Minimum Tax that will help more than 30 million middle-income taxpayers avoid paying higher taxes. Taking into account that only 4 million taxpayers had to pay it last year, this is certainly good news for the 26 million who were spared!
  6. Commonly overlooked deductions. And finally, the following are some of the most frequently overlooked tax-deductable expenses:  
    • Alimony paid
    • Prescription eyeglasses, contacts, and hearing aids
    • Medical transportation costs
    • Charitable contributions
    • Prescribed weight-loss programs
    • Chiropractic treatments
    • Drug or alcohol rehabilitation programs
    • Points paid for a mortgage or refinancing a home
    • Unreimbursed employee business expenses
    • Mileage and other expenses associated with volunteer work
    • Casualty and theft losses
    • Tax preperation software and fees

 

Jessica Horton is a former copywriter and community manager at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

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