Don’t Overlook These Commonly Missed Tax Breaks

February 25, 2014

You’ve probably seen the commercial with pallets of money being dropped from above, representing a billion dollars of missed tax deductions and credits from taxpayers who do their own taxes.  You don’t have to go to a tax pro to get your fair share, however.  Just make sure you don’t overlook some of the following items that could increase your tax refund:

  • Head of Household Filing Status:  If you aren’t married but provide for more than half the cost of maintaining your home AND have a qualifying child or qualifying relative (mom, dad, grandparent, brother, sister) that lives with you, then you could be eligible to file as HOH, which gives you a higher standard deduction of $8,950.  This shelters an extra $2,850 of your income compared to the $6,100 standard deduction for single filers.  Plus, the tax table for HOH may allow you to stay in a lower marginal tax bracket.  For example, a single filer moves into the 25% federal tax bracket with taxable income over $36,250 but a HOH filer would need to make over $48,600 in taxable income to move into the 25% tax bracket.
  • Student Loan Interest Deduction:  Make sure to go online and download your 1098-E form. Your lender is only required to mail this form to you if you paid $600 or more in interest so don’t assume you have no write-off if you didn’t get the form in your mailbox. As long as your AGI is less than $75,000 for single filers and $155,000 for MFJ and no one else claims you as a dependent, you should qualify for a deduction of up to $2,500 of the student loan interest you paid last year.  According to TurboTax, you can even take this deduction if mom or dad is paying your student loan payment for you as long as they aren’t claiming you as their dependent.
  • Saver’s Credit:  If you contributed to your employer’s retirement plan or an IRA, you may be eligible for a credit of up to $2,000 from the IRS if you file MFJ and your combined income is less than $59,000.  For single filers, your income needs to be less than $29,500 and the HOH income limit is $44,250.  If you qualify, just make sure to complete IRS form 8880 to claim the credit.
  • Earned Income Credit:  An estimated 25% of taxpayers miss this credit, states TurboTax, and it could be worth anywhere up to $6,044.  Even if you don’t owe any taxes, you might be eligible for this refundable credit but you have to file a tax return to claim it.  If you earned less than $51,567 you can use the IRS Online EIC Assistant to see if you qualify.

The IRS also lists some common errors that could impact your tax refund, which you can usually avoid by using tax preparation software. But if you do decide to hire a pro, just remember one thing. Those tax preparation fees may be deductible too.