DEDUCTIONS AND CREDITS
Adoption
Charitable Contributions
Earned Income Tax Credit
Educational Expenses
Energy Tax Credits
Employee Business Expenses
Other Deductions and Credits
Charitable Contributions
Earned Income Tax Credit
Educational Expenses
Energy Tax Credits
Employee Business Expenses
Other Deductions and Credits
Top Six Things You Should Know about the Child Tax Credit
The Child Tax Credit may save you money at tax-time if you have a qualified child. Here are six things you should know about the credit.
1. Amount. The Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child that you are eligible to claim on your tax return.
2. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.
3. Qualifications. For this credit, a qualifying child must pass several tests:
• Age test. The child must have been under age 17 at the end of 2014.
• Relationship test. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
• Support test. The child must not have provided more than half of their own support for the year.
• Dependent test. The child must be a dependent that you claim on your federal tax return.
• Joint return test. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
• Citizenship test. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
• Residence test. In most cases, the child must have lived with you for more than half of 2014.
4. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.
5. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check whether you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.
1. Amount. The Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child that you are eligible to claim on your tax return.
2. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.
3. Qualifications. For this credit, a qualifying child must pass several tests:
• Age test. The child must have been under age 17 at the end of 2014.
• Relationship test. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
• Support test. The child must not have provided more than half of their own support for the year.
• Dependent test. The child must be a dependent that you claim on your federal tax return.
• Joint return test. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
• Citizenship test. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
• Residence test. In most cases, the child must have lived with you for more than half of 2014.
4. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.
5. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check whether you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.
Save Twice with the Saver’s Credit
If you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit. Here are six tips you should know about this credit:
1. Save for retirement. The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.
2. Save on taxes. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.
3. Income limits. Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:
• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.
• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.
• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.
4. When to contribute. If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.
If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.
5. Special rules apply. Other special rules that apply to the credit include:
• You must be at least 18 years of age.
• You can’t have been a full-time student in 2014.
• Another person can’t claim you as a dependent on their tax return.
6. Visit IRS.gov. You figure your credit amount based on your filing status, adjusted gross income, tax liability and the amount of your qualified contribution. Other rules also apply. For more information visit IRS.gov.
1. Save for retirement. The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.
2. Save on taxes. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.
3. Income limits. Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:
• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.
• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.
• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.
4. When to contribute. If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.
If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.
5. Special rules apply. Other special rules that apply to the credit include:
• You must be at least 18 years of age.
• You can’t have been a full-time student in 2014.
• Another person can’t claim you as a dependent on their tax return.
6. Visit IRS.gov. You figure your credit amount based on your filing status, adjusted gross income, tax liability and the amount of your qualified contribution. Other rules also apply. For more information visit IRS.gov.
Miscellaneous Deductions Can Cut Taxes
You may be able to deduct certain miscellaneous costs you pay during the year. Examples include employee expenses and fees you pay for tax advice. If you itemize, these deductions could lower your tax bill.
Here are some things the IRS wants you to know about miscellaneous deductions:
Deductions Subject to the Two Percent Limit. You can deduct most miscellaneous costs only if their total is more than two percent of your adjusted gross income. These include expenses such as:
Deductions Not Subject to the Two Percent Limit. Some deductions are not subject to the two percent limit. They include:
Here are some things the IRS wants you to know about miscellaneous deductions:
Deductions Subject to the Two Percent Limit. You can deduct most miscellaneous costs only if their total is more than two percent of your adjusted gross income. These include expenses such as:
- Unreimbursed employee expenses.
- Expenses related to searching for a new job in the same line of work.
- Certain work clothes and uniforms.
- Tools needed for your job.
- Union dues.
- Work-related travel and transportation.
Deductions Not Subject to the Two Percent Limit. Some deductions are not subject to the two percent limit. They include:
- Certain casualty and theft losses. Generally, this applies to damaged or stolen property that you held for investment. This includes items such as stocks, bonds and works of art.
- Gambling losses up to the amount of your gambling winnings.
- Losses from Ponzi-type investment schemes.
Plan Now to Get Full Benefit of Saver’s Credit; Tax Credit Helps Low- and Moderate-Income Workers Save for Retirement
WASHINGTON — Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2013 and the years ahead, according to the Internal Revenue Service.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return. People have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2014 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.
In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $166 for heads of household and $128 for single filers.
The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:
Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2013, this rule applies to distributions received after 2010 and before the due date, including extensions, of the 2013 return. Form 8880 and its instructions have details on making this computation.
Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on IRS.gov.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return. People have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2014 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
- Married couples filing jointly with incomes up to $59,000 in 2013 or $60,000 in 2014;
- Heads of Household with incomes up to $44,250 in 2013 or $45,000 in 2014; and
- Married individuals filing separately and singles with incomes up to $29,500 in 2013 or $30,000 in 2014.
Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.
In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $166 for heads of household and $128 for single filers.
The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:
- Eligible taxpayers must be at least 18 years of age.
- Anyone claimed as a dependent on someone else’s return cannot take the credit.
- A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2013, this rule applies to distributions received after 2010 and before the due date, including extensions, of the 2013 return. Form 8880 and its instructions have details on making this computation.
Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on IRS.gov.