Other Deductions and Credits

OTHER DEDUCTIONS AND CREDITS

See also: IRS Publication 529 Misc. Deductions

Moving this Year? If You Receive the Premium Tax Credit, Report this Life Event

If you moved recently, you've probably notified several organizations - like the U.S. Postal Service and utility companies - about your new address. You may have even notified the IRS about your address change. If you get health insurance coverage through a Health Insurance Marketplace, you should add one more important notification to your list; the Marketplace.

If you are receiving advance payments of the premium tax credit, it is particularly important that you report changes in circumstances, including moving, the the Marketplace. There's a simple reason. Reporting your move lets the Marketplace update the information used to determine your eligibility for a Marketplace plan, which may affect the appropriate amount of advance payments of the premium tax credit that the government sends to your health insurer on your behalf.

Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. On the other hand, getting too little could mean missing out on monthly premium assistance that you deserve.

Changes in circumstances that you should report to the Marketplace include:

an increase or decrease in your income, including lump sum payments like a lump sum payment of Social Security benefits.
marriage or divorce
the birth or adoption of a child
starting a job with health insurance
gaining or losing your eligibility for other health care coverage

Many of these changes in circumstances - including moving out of the area served by your current Marketplace plan - qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find information about special enrollment periods at HealthCare.gov.

The Premium Tax Credit Change Estimator can help you estimate how your premium tax credit will change if you experience a change in circumstance during the year.

Job Search Expenses May be Deductible

People often change their job in the summer. If you look for a job in the same line of work, you may be able to deduct some of your job search costs. Here are some key tax facts you should know about if you search for a new job:

Same Occupation. Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.

Résumé Costs. You can deduct the cost of preparing and mailing your résumé.

Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.

Placement Agency. You can deduct some job placement agency fees you pay to look for a job.

First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.

Substantial Job Break. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.

Reimbursed Costs. Reimbursed expenses are not deductible.

Schedule A. You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.

Premium Tax Credit. If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance Marketplace. Other changes that you should report include changes in your family size or address. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

For more on job hunting refer to Publication 529, Miscellaneous Deductions.

Keep Track of Miscellaneous Deductions

Miscellaneous deductions can cut taxes. These may include certain expenses you paid for in your work if you are an employee. You must itemize deductions when you file to claim these costs. So if you usually claim the standard deduction, think about itemizing instead. You might pay less tax if your itemize. Here are some IRS tax tips you should know that may help you reduce your taxes:

Deductions Subject to the Limit. You can deduct cost miscellaneous costs only if their sum is more than two percent of your adjusted gross income. These include expenses such as:

Reimbursed employee expenses.

Job search costs for a new job in the same line of work.

Some work clothes and uniforms.

Tools for your job.

Union dues

Work-related travel and transportation.

The cost you paid to prepare your tax return. These fees include the cost you paid for tax preparation software. They also include any fee you paid for eFiling of your return.

Deductions Not Subject to the Limit. Some deductions are not subject to the two percent limit. They include:

Certain casualty and theft losses. In most cases, this rule applies to damaged or stolen property you held for investment. This rules applies to damaged or stolen property you held for investment. This may include property such as stocks, bonds and works of art.
Gambling losses up to the total of your gambling winnings.
Losses from Ponzi-type investment schemes.

There are many expenses that you can't deduct. For example, you can't deduct personal living or family expenses. You claim allowable miscellaneous deductions on Schedule A, Itemized Deductions. For more about this topic see Publication 529, Miscellaneous Deductions.

The Premium Tax Credit - The Basics

If you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit.

Here are some basic facts about the premium tax credit.

What is the premium tax credit?

The premium tax credit is a credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace.

What is the Health Insurance Marketplace?

The Health Insurance Marketplace is the place where you will find information about private health insurance options, purchase health insurance, and obtain help with premiums and out-of-pocket costs if you are eligible. Learn more about the Marketplace at HealthCare.gov.

How do I get the premium tax credit?

When you apply for coverage in the Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year, using information you provide about your family composition and projected household income. Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums. If you choose to have all or some of your credit paid in advance, you will be required to reconcile on your income tax return the amount of advance payments that the government sent on your behalf with the premium tax credit that you may claim based on your actual household income and family size.

What happens if my income or family size changes during the year?

The actual premium tax credit for the year will differ from the advance credit amount estimated by the Marketplace if your family size and household income as estimated at the time of enrollment are different from the family size and household income you report on your return. The more your family size or household income differs from the Marketplace estimates used to compute your advance credit payments, the more significant the difference will be between your advance credit payments and your actual credit.

Top Six Tips about the Home Office Deduction

If you use your home for business, you may be able to deduct expenses for the business use of your home. If you qualify you can claim the deduction whether you rent or own your home. If you qualify for the deduction you may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction.

1. Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:

Your principal place of business, or
A place where you meet clients or customers in the normal course of business, or
A separate structure not attached to your home. Examples could include a garage or a studio.

2. Simplified Option. If you use the simplified option, you multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the criteria for who may claim a home office deduction.

3. Regular Method. If you use the regular method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.

4. Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.

6. Employees. If you are an employee, you must meet additional rules to claim the deduction. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.

How You Can Benefit from the Premium Tax Credit

If you purchase Health Coverage through the Marketplace, you might be eligible for the premium tax credit. The law bases the size of your premium tax credit on a sliding scale. Those who have a lower income get a larger credit to help cover the cost of their insurance. In other words, the higher your income, the lower the amount of your credit.

You will figure your credit on Form 8962, Premium Tax Credit (PTC). You must complete this form to claim the premium tax credit and reconcile any advance credit payments with the premium tax credit you are eligible to claim on your return. Form 1095-A, Health Insurance Marketplace Statement, which you will receive from your Marketplace, provides information you will need when completing Form 8962.

Additionally, the premium tax credit is a refundable tax credit. This means that if the amount of the credit is more than the amount of your tax liability, you will receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund.

However, if you receive advance payments of the credit, you will reconcile the advance payments with the amount of the actual premium tax credit that you calculate on your tax return. If your actual allowable credit on your return is less than your advance credit payments, the difference, subject to certain caps, will be subtracted from your refund or added to your balance due. If your actual allowable credit is more than your advance credit payments, the difference will be added to your refund or subtracted from your balance due.

Claiming a Tax Deduction for Medical and Dental Expenses

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can claim a tax deduction:

You must itemize. You can only claim your medical expenses that you paid for in 2014 if you itemize deductions on your federal tax return. If you take the standard deduction, you can’t claim these expenses.

AGI threshold. You include all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income.

Temporary threshold for age 65. If you or your spouse is age 65 or older, the AGI threshold is 7.5 percent of your AGI. This exception applies through Dec. 31, 2016.

Costs to include. You can include most medical and dental costs that you paid for yourself, your spouse and your dependents. Exceptions and special rules apply. Costs reimbursed by insurance or other sources do not qualify for a deduction.

Expenses that qualify. You can include the costs of diagnosing, treating, easing or preventing disease. The costs you pay for prescription drugs and insulin qualify. The costs you pay for insurance premiums for policies that cover medical care qualify. Some long-term care insurance costs also qualify. For more examples of costs you can and can’t deduct, see IRS Publication 502, Medical and Dental Expenses.

Travel costs count. You may be able to claim travel costs you pay for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 23.5 cents per mile for 2014.

No double benefit. You can’t claim a tax deduction for medical expenses you paid for with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free. This rule prevents two tax benefits for the same expense.

Important Information about Advance Payments of the Premium Tax Credit and Your Tax Return

The Affordable Care Act includes financial assistance in the form of the premium tax credit for eligible taxpayers with moderate incomes who purchase coverage through the Health Insurance Marketplace.

When you purchased coverage for 2014 through the Marketplace, you may have chosen to have the government send advance payments of the premium tax credit to your insurer to lower your monthly insurance premiums. At that time, the Marketplace estimated these credits based on information you provided about your expected household income and family size for the year.

If you chose to have advance credit payments sent to your insurer, you must file a federal income tax return, even if otherwise not required to file. You will need to reconcile these payments with the amount of premium tax credit you’re eligible for on your tax return. Receiving too much or too little in advance can affect your refund or balance due when you file.

For example, if you had certain life changes during the year and notified the Marketplace, the Marketplace should have adjusted the amount of the advance credit payments sent to your insurer accordingly. If you did not notify the Marketplace about these life changes, the advance credit payments may have been either too high or too low.

Advance credit payments that are lower than the amount of premium tax credit on your tax return will reduce your tax bill or increase your refund.

On the other hand, if your advance credit payments are more than the premium tax credit you are eligible for based on your actual income, you will need to repay the excess amount, subject to certain caps. This will result in a smaller refund or a larger bill when you file your return. The repayment amount is based on your household income and family size. For more information on the repayment if your household income is less than 400 percent of the federal poverty line, the repayment amount is limited. Taxpayers with household incomes of 400 percent or more of the federal poverty line must repay all of the excess amount. See the instructions for Form 8962, Premium Tax Credit (PTC) for more information on the federal poverty line amounts.

Normally, taxpayers may owe certain penalties for late payments or underpayment of estimated tax. However, to help smooth the process for the first year of the Affordable Care Act, the IRS will waive these penalties for eligible taxpayers if they resulted from repayment of excess advance payments of the premium tax credit. This has no effect on the fee individuals will pay if they chose not to buy affordable health coverage.

You must complete Form 8962 to claim the premium tax credit and reconcile your advance credit payments with the premium tax credit you are eligible to claim on your return. You should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. This form provides information you will need when completing Form 8962. If you have questions about the information on Form 1095-A for 2014, or about receiving Form 1095-A for 2014, you should contact your Marketplace directly.

Taxpayers Will Use New Information Statement to claim Premium Tax Credit

The Affordable Care Act is bringing several changes to the tax filing season this year, including a new form some taxpayers will receive. If you or anyone in your household enrolled in a health plan through the Health Insurance Marketplace in 2014, you’ll get Form 1095-A, Health Insurance Marketplace Statement.

You will receive Form 1095-A from the Marketplace where you purchased your coverage, not the IRS. This form should arrive in the mail from your Marketplace by early February. You should wait to receive your Form 1095-A before filing your taxes.

Form 1095-A will tell you the dates of coverage, total amount of the monthly premiums for your insurance plan, information you may use to determine the amount of your premium tax credit, and any amounts of advance payments of the premium tax credit.

You will use the information to calculate the amount of your premium tax credit and reconcile advance payments of the premium tax credit made on your behalf to your insurance provider with the premium tax credit you are claiming on your tax return. To do this, you will use Form 8962, Premium Tax Credit (PTC), which you file with your tax return.

If you do not receive your Form 1095-A by early February, you should contact the state or federal Marketplace from which you received coverage. If you believe any information on your Form 1095-A is incorrect, you should contact the state or federal Marketplace from which you received coverage. The Marketplace may need to send you a corrected Form 1095-A.

You may receive more than one Form 1095-A if different members of your household had different health plans, you updated your coverage information during the year, or you switched plans during the year.

For more information about the Affordable Care Act and your 2014 income tax return, visit IRS.gov/aca.

Premium Tax Credit Brings Changes to Your 2014 Income Tax Returns

When filing your 2014 federal income tax return, you will see some changes related to the Affordable Care Act. Millions of people who purchased their coverage through a health insurance Marketplace are eligible for premium assistance through the new premium tax credit, which individuals chose to either have paid upfront to their insurers to lower their monthly premiums, or receive when they file their taxes. When you bought your insurance, if you chose to have advance payments of the premium tax credit, the Marketplace estimated the amount based on information you provided about your expected household income and family size for the year.

If you received the benefit of advance credit payments, you must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit you are eligible to claim on your return. You will use IRS Form 8962, Premium Tax Credit (PTC) to make this comparison and to claim the credit. If your advance credit payments are in excess of the amount of the premium tax credit you are eligible for, based on your actual income, you must repay some or all of the excess when you file your return, subject to certain caps.

If you purchased your coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace. You should receive this form by early February.

Form 1095-A will provide the information you need to file your taxes, including the name of your insurance company, dates of coverage, amount of monthly insurance premiums for the plan you and other members of your family enrolled in, amount of any advance payments of the premium tax credit for the year, and other information needed need to compute the premium tax credit.

For more information about the Affordable Care Act and filing your 2014 income tax return, visit IRS.gov/aca.

New Standard Mileage Rates Now Available; Business Rate to Rise in 2015

WASHINGTON — The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

57.5 cents per mile for business miles driven, up from 56 cents in 2014
23 cents per mile driven for medical or moving purposes, down half a cent from 2014
14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.

Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan.

Back-to-School Tax Credits

Are you, your spouse or a dependent heading off to college? If so, here’s a quick tip from the IRS: some of the costs you pay for higher education can save you money at tax time. Here are several important facts you should know about education tax credits:

American Opportunity Tax Credit. The AOTC can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. That means that you may be able to get up to $1,000 of the credit as a refund, even if you don’t owe any taxes.
Lifetime Learning Credit. With the LLC, you may be able to claim a tax credit of up to $2,000 on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.
One credit per student. You can claim only one type of education credit per student on your federal tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student. For example, you can claim the AOTC for one student and claim the LLC for the other student.
Qualified expenses. You may include qualified expenses to figure your credit. This may include amounts you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more about the additional rules that apply to each credit.
Eligible educational institutions. Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other post-secondary schools may also qualify.
Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school. This form reports your qualified expenses to the IRS and to you. You may notice that the amount shown on the form is different than the amount you actually paid. That’s because some of your related costs may not appear on Form 1098-T. For example, the cost of your textbooks may not appear on the form, but you still may be able to claim your textbook costs as part of the credit. Remember, you can only claim an education credit for the qualified expenses that you paid in that same tax year.
Nonresident alien. If you are in the U.S. on an F-1 student visa, you usually file your federal tax return as a nonresident alien. You can’t claim an education credit if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes. To learn more about these rules see Publication 519, U.S. Tax Guide for Aliens.
Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

Deducting Moving Expenses

If you move because of your job, you may be able to deduct the cost of the move on your tax return. You may be able to deduct your costs if you move to start a new job or to work at the same job in a new location. The IRS offers the following tips about moving expenses and your tax return.

In order to deduct moving expenses, your move must meet three requirements:

1. The move must closely relate to the start of work. Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test. Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.

3. You must meet the time test. After the move, you must work full-time at your new job for at least 39 weeks the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at the new job site. If your income tax return is due before you've met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

If you can claim this deduction, here are a few more tips from the IRS:

Travel. You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
Household goods and utilities. You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
Nondeductible expenses. You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
Reimbursed expenses. If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
Address Change. When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances. If you purchased health insurance coverage from the Health Insurance Marketplace, you may receive advance payment of the premium tax credit in 2014. It is important that you report changes in circumstances, such as when you move to a new address, to your Marketplace. Other changes that you should report include changes in your income, employment, family size, or eligibility for other coverage. Advance credit payments provide premium assistance to help you pay for the insurance you buy through the Marketplace. Reporting changes will help you get the proper type and amount of premium assistance so you can avoid getting too much or too little in advance.

Job Hunting Expenses

Many people change their job in the summer. If you look for a new job in the same line of work, you may be able to deduct some of your job hunting costs.

Here are some key tax facts you should know about if you search for a new job:

Same Occupation. Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.

Résumé Costs. You can deduct the cost of preparing and mailing your résumé.

Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.

Placement Agency. You can deduct some job placement agency fees you pay to look for a job.

First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.

Work-Search Break. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.

Reimbursed Costs. Reimbursed expenses are not deductible.

Schedule A. You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.

Premium Tax Credit. If you receive advance payment of the premium tax credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

Changes in Circumstances can affect your Premium Tax Credit

If you receive advance payment of the premium tax credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace.

Most people already have insurance and they won’t have to do anything new. If you are looking for health insurance, you may be able to get it through the Health Insurance Marketplace and you may qualify for the premium tax credit. You can “get it now” as an advance payment or you can “get it later” when you file your tax return.

Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Having at least some of your credit paid in advance directly to your insurance company will reduce the out-of-pocket cost of the health insurance premiums you’ll pay each month.

If you decide to get the credit in advance, it’s important to report any changes in your income or family size to the Marketplace throughout the year. Reporting these changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

The government makes advance payments of the credit based on an estimate of the credit that you will claim on your tax return when you file in 2015. If you report changes in your income or family size to the Marketplace when they happen in 2014, the advance payments will more closely match the credit amount on your 2014 federal tax return. This will help you avoid getting a smaller refund than you expected or even owing money that you did not expect to owe.

Don’t Overlook the Child and Dependent Care Tax Credit

Many people pay for the care of their child or other dependent while they’re at work. The Child and Dependent Care Credit can reduce that cost. Here are 10 facts from the IRS about this important tax credit:

1. You may qualify for the credit if you paid someone to care for your child, dependent or spouse last year.

2. The care you paid for must have been necessary so you could work or look for work. This also applies to your spouse if you are married and filing jointly.

3. The care must have been for ‘qualifying persons.’ A qualifying person can be your child under age 13. They may also be a spouse or dependent who is physically or mentally incapable of self-care. They must also have lived with you for more than half the year.

4. You, and your spouse if you file jointly, must have earned income, such as wages from a job. Special rules apply to a spouse who is a student or disabled.

5. The payments for care can’t go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Care payments also can’t go to your child under the age of 19, even if the child isn't your dependent.

6. The credit is worth up to 35 percent of the qualifying costs for care, depending on your income. The limit is $3,000 of your total cost for the care of one qualifying person. If you pay for the care of two or more qualifying persons, you can claim up to $6,000 of your costs.

7. If your employer provides dependent care benefits, special rules apply. For more see Form 2441, Child and Dependent Care Expenses.

8. You must include the Social Security number of each qualifying person to claim the credit.

9. You must include the name, address and identifying number of your care provider to claim the credit. This is usually the Social Security number of an individual or the Employer Identification Number of a business.

10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.

Boost Your Retirement Savings with a Tax Credit

If you contribute to a retirement plan, like a 401(k) or an IRA, you may be eligible for the Saver’s Credit. The Saver’s Credit can help you save for retirement and reduce the tax you owe. Here are five facts from the IRS that you should know about this credit:

1. The Saver’s Credit is the short name for the Retirement Savings Contribution Credit. It can be worth up to $2,000 for married couples filing a joint return. The credit is worth up to $1,000 for single taxpayers.

2. Eligibility depends on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2013 tax return if you’re:

• Married filing separately or a single taxpayer with income up to $29,500

• Head of household with income up to $44,250

• Married filing jointly with income up to $59,000

3. 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 2013.

• You can’t be claimed as a dependent on another person’s tax return.

4. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2013. The due date for most people is April 15, 2014.

5. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software will do this for you if you e-file.

The Saver’s Credit is in addition to other tax savings you can get if you set aside money for retirement. For example, you may also be able to deduct your contributions to a traditional IRA.

The Premium Tax Credit

The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. To be eligible for the credit, you generally need to satisfy three rules.

First, you need to get your health insurance coverage through the Health Insurance Marketplace. The open enrollment period to purchase health insurance coverage for 2014 through the Health Insurance Marketplace runs from October 1, 2013 through March 31, 2014.

Second, you need to have household income between one and four times the federal poverty line. For a family of four for tax year 2014, that means income from $23,550 to $94,200.

Third, you can’t be eligible for other coverage, such as Medicare, Medicaid, or sufficiently generous employer-sponsored coverage.

If a Marketplace determines that you’re likely to qualify for the tax credit at the time you enroll, you have two choices: You can choose to have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014. Or, you can wait to get all of the credit when you file your 2014 tax return in 2015.

If you wait to get the credit, it will either increase your refund or lower your balance due.

If you choose to receive the credit in advance, changes in your income or family size will affect the credit that you are eligible to receive. If the credit on your tax return you file in 2015 does not match the amount you have received in advance, you will have to repay any excess advance payment, or you may get a larger refund if you are entitled to more. It is important to tell your Marketplace about changes in your income or family size as they happen during 2014 because these changes will affect the amount of your credit.

Deducting Medical and Dental Expenses

If you plan to claim a deduction for your medical expenses, there are some new rules this year that may affect your tax return. Here are eight things you should know about the medical and dental expense deduction:

1. AGI threshold increase Starting in 2013, the amount of allowable medical expenses you must exceed before you can claim a deduction is 10 percent of your adjusted gross income. The threshold was 7.5 percent of AGI in prior years.

2. Temporary exception for age 65 The AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. This exception will apply through Dec. 31, 2016.

3. You must itemize You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can’t claim these expenses if you take the standard deduction.

4. Paid in 2013 You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.

5. Costs to include You can include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.

6. Expenses that qualify You can include the costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums that you pay for policies that cover medical care qualifies, as does the cost of some long-term care insurance. The cost of prescription drugs and insulin also qualify. For more examples of costs you can deduct, see IRS Publication 502, Medical and Dental Expenses.

7. Travel costs count You may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.

8. No double benefit You can’t claim a tax deduction for medical and dental expenses you paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

What You Should Know about AMT

Have you ever wondered if the Alternative Minimum Tax applies to you? You may have to pay this tax if your income is above a certain amount. The AMT attempts to ensure that some individuals who claim certain tax benefits pay a minimum amount of tax.

Here are some things from the IRS that you should know about AMT:

1. You may have to pay the tax if your taxable income, plus certain adjustments, is more than the AMT exemption amount for your filing status. If your income is below this amount, you usually will not owe AMT.

2. The 2013 AMT exemption amounts for each filing status are:

• Single and Head of Household = $51,900

• Married Filing Joint and Qualifying Widow(er) = $80,800

• Married Filing Separate = $40,400

3. The rules for AMT are more complex than the rules for regular income tax. The best way to make it easy on yourself is to use IRS e-file to prepare and file your tax return. E-file tax software will figure AMT for you if you owe it.

4. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.

5. If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.

2014 Standard Mileage Rates for Business, Medical and Moving Announced

WASHINGTON — The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

56 cents per mile for business miles driven
23.5 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates. The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Helpful Tax Tips if You’re Moving this Summer

If you make a work-related move this summer, you may be able to deduct the costs of the move. This may apply if you move to start a new job or to work at the same job in a new job location. The IRS offers the following tips on moving expenses you may be able to deduct on your tax return.

In order to deduct moving expenses, you must meet these three requirements:

1. Your move closely relates to the start of work.  Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement.

2. You meet the distance test.  Your new main job location must be at least 50 miles farther from your former home than your previous main job location was. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.

3. You meet the time test.  After you move, you must work full time at your new job location for at least 39 weeks during the first year. Self-employed individuals must meet this test and also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.

See Publication 521, Moving Expenses, for more information about these rules. If you can claim this deduction, here are a few more tips from the IRS:

Travel. You can deduct transportation and lodging expenses for yourself and household members while moving from your former home to your new home. You cannot deduct the cost of meals during the travel.
Household goods. You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
Utilities. You can deduct the costs of connecting or disconnecting utilities.
Nondeductible expenses. You cannot deduct as moving expenses any part of the purchase price of your new home, the costs of buying or selling a home, or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
Reimbursed expenses. If your employer reimburses you for the costs of a move for which you took a deduction, you may have to include the reimbursement as income on your tax return.
Update your address. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. File Form 8822, Change of Address, to notify the IRS.
Tax form to file. To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses.

Tips for Taxpayers Who Travel for Charity Work

Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year. Here are five tax tips the IRS wants you to know about travel while serving a charity.

1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use the Select Check tool to see if the group is qualified.

2. You may be able to deduct un-reimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services.

3. The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.

4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

5. Deductible travel expenses may include:

Air, rail and bus transportation
Car expenses
Lodging costs
The cost of meals
Taxi fares or other transportation costs between the airport or station and your hotel

Job Search Expenses May Lower Your Taxes

Summer is often a time when people make major life decisions. Common events include buying a home, getting married or changing jobs. If you’re looking for a new job in your same line of work, you may be able to claim a tax deduction for some of your job hunting expenses.

Here are seven things the IRS wants you to know about deducting these costs:

1. Your expenses must be for a job search in your current occupation. You may not deduct expenses related to a search for a job in a new occupation. If your employer or another party reimburses you for an expense, you may not deduct it.

2. You can deduct employment and job placement agency fees you pay while looking for a job.

3. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.

4. If you travel to look for a new job, you may be able to deduct your travel expenses. However, you can only deduct them if the trip is primarily to look for a new job.

5. You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one.

6. You can’t deduct job search expenses if you’re looking for a job for the first time.

7. You usually will claim job search expenses as a miscellaneous itemized deduction. You can deduct only the amount of your total miscellaneous deductions that exceed two percent of your adjusted gross income.

Itemizing vs. Standard Deduction: Six Facts to Help You Choose

When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

The IRS offers these six facts to help you choose.

1. Figure your itemized deductions. Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.

2. Know your standard deduction. If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:

• Single = $5,950
• Married Filing Jointly = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

3. Apply other rules in some cases. Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. To figure your standard deduction in these cases, use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return.

4. Check for the exceptions. Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.

5. Choose the best method. Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.

6. File the right forms. To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

Home Office Deduction: a Tax Break for Those Who Work from Home

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

• your principal place of business, or

• a place where you meet with patients, clients or customers in the normal course of your business, or

• a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

Five Tax Credits that Can Reduce Your Taxes

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).

5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.

Seven Important Tax Facts about Medical and Dental Expenses

If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction.

1. You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.

2. Deduction is limited. You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.

3. Expenses paid in 2012. You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.

4. Qualifying expenses. You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.

5. Costs to include. You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.

6. Travel is included. You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.

7. No double benefit. Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.

Save Money with the Child Tax Credit

If you have a child under age 17, the Child Tax Credit may save you money at tax-time. Here are some facts the IRS wants you to know about the credit.

Amount. The non-refundable Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return.
Qualifications. For this credit, a qualifying child must pass seven tests:

1. Age test. The child must have been under age 17 at the end of 2012.

2. Relationship test. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child may also be a descendant of any of these individuals, including 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.

3. Support test. The child must not have provided more than half of their own support for the year.

4. Dependent test. You must claim the child as a dependent on your federal tax return.

5. 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.

6. Citizenship test. The child must be a U.S. citizen, U.S. national or U.S. resident alien.

7. Residence test. In most cases, the child must have lived with you for more than half of 2012.

Limitations. The Child Tax Credit is subject to income limitations, and may be reduced or eliminated depending on your filing status and income.
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 refundable Additional Child Tax Credit.
Schedule 8812. If you qualify to claim the Child Tax Credit make sure to check whether you must complete and attach the new Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.

Five Facts to Know about AMT

The Alternative Minimum Tax may apply to you if your income is above a certain amount. Here are five facts the IRS wants you to know about the AMT:

1. You may have to pay the tax if your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status.

2. The 2012 AMT exemption amounts for each filing status are:

Single and Head of Household = $50,600;
Married Filing Joint and Qualifying Widow(er) = $78,750; and
Married Filing Separate = $39,375.

3. AMT attempts to ensure that some individuals and corporations who claim certain exclusions, tax deductions and tax credits pay a minimum amount of tax.

4. You should use IRS e-file to prepare and file your tax return. You figure AMT using different rules than those you use to figure your regular income tax. IRS e-file software will determine if you owe AMT, and if you do, it will figure the tax for you.

5. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.

IRS Announces Simplified Option for Claiming Home Office Deduction Starting This Year; Eligible Home-Based Businesses May Deduct up to $1,500; Saves Taxpayers 1.6 Million Hours A Year

WASHINGTON — The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

"This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction," said Acting IRS Commissioner Steven T. Miller. "The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013."

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after January 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.
Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.

Annual Inflation Adjustments for 2013

WASHINGTON — The Internal Revenue Service announced today annual inflation adjustments for tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012.

The tax items for 2013 of greatest interest to most taxpayers include the following changes.

Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates.
The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.
The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $150,000 ($300,000 for married couples filing jointly). It phases out completely at $211,250 ($422,500 for married couples filing jointly.)
The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).
The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.
Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.
For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

2013 Standard Mileage Rates Up 1 Cent per Mile for Business, Medical and Moving

WASHINGTON — The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

56.5 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Don’t Overlook the Benefits of Miscellaneous Deductions

If you are able to itemize your deductions on your tax return instead of claiming the standard deduction, you may be able to claim certain miscellaneous deductions. A tax deduction reduces the amount of your taxable income and generally reduces the amount of taxes you may have to pay.

Here are some things you should know about miscellaneous tax deductions:

Deductions Subject to the 2 Percent Limit. You can deduct the amount of certain miscellaneous expenses that exceed 2 percent of your adjusted gross income. Deductions subject to the 2 percent limit include:

Unreimbursed employee expenses such as searching for a new job in the same profession, certain work clothes and uniforms, work tools, union dues, and work-related travel and transportation.
Tax preparation fees.
Other expenses that you pay to:

– Produce or collect taxable income,
– Manage, conserve, or maintain property held to produce taxable income, or
– Determine, contest, pay, or claim a refund of any tax.

Examples of other expenses include certain investment fees and expenses, some legal fees, hobby expenses that are not more than your hobby income and rental fees for a safe deposit box if it is not used to store jewelry and other personal effects.

Deductions Not Subject to the 2 Percent Limit. The list of deductions not subject to the 2 percent limit of adjusted gross income includes:

Casualty and theft losses from income-producing property such as damage or theft of stocks, bonds, gold, silver, vacant lots, and works of art.
Gambling losses up to the amount of gambling winnings.
Impairment-related work expenses of persons with disabilities.
Losses from Ponzi-type investment schemes.

Qualified miscellaneous deductions are reported on Schedule A, Itemized Deductions. Keep records of your miscellaneous deductions to make it easier for you to prepare your tax return when the filing season arrives.

There are also many expenses that you cannot deduct such as personal living or family expenses.

Job Search Expenses Can be Tax Deductible

Summertime is the season that often leads to major life decisions, such as buying a home, moving or a job change. If you are looking for a new job that is in the same line of work, you may be able to deduct some of your job hunting expenses on your federal income tax return.

Here are seven things the IRS wants you to know about deducting costs related to your job search:

1. To qualify for a deduction, your expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.

2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you received in your gross income, up to the amount of your tax benefit in the earlier year.

3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.

4. If you travel to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you travelled. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity unrelated to your job search compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

5. You cannot deduct your job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

6. You cannot deduct job search expenses if you are looking for a job for the first time.

7. The amount of job search expenses that you can claim is limited. To determine your deduction, use Schedule A, Itemized Deductions. Job search expenses are claimed as a miscellaneous itemized deduction and the total of all miscellaneous deductions must be more than two percent of your adjusted gross income.

Injured or Innocent Spouse Tax Relief

You may be an injured spouse if you file a joint tax return and all or part of your portion of a refund was, or is expected to be, applied to your spouse’s legally enforceable past due financial obligations.

Here are seven facts about claiming injured spouse relief:

To be considered an injured spouse; you must have paid federal income tax or claimed a refundable tax credit, such as the Earned Income Credit or Additional Child Tax Credit on the joint return, and not be legally obligated to pay the past-due debt.
Special rules apply in community property states. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
If you filed a joint return and you’re not responsible for the debt, but you are entitled to a portion of the refund, you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
You may file form 8379 along with your original tax return or your may file it by itself after you receive an IRS notice about the offset.
You can file Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write “INJURED SPOUSE” at the top left of the Form 1040, 1040A or 1040EZ. IRS will process your allocation request before an offset occurs.
If you are filing Form 8379 by itself, it must show both spouses’ Social Security numbers in the same order as they appeared on your income tax return. You, the “injured” spouse, must sign the form.
Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. However, in 2011 the IRS eliminated the two-year time limit that applies to certain relief requests. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.

Four Tax Credits That Can Boost Your Refund

A tax credit is a dollar-for-dollar reduction of taxes owed. Some tax credits are refundable meaning if you are eligible and claim one, you can get the rest of it in the form of a tax refund even after your tax liability has been reduced to zero.

Here are four refundable tax credits you should consider to increase your refund on your 2011 federal income tax return:

1. The Earned Income Tax Credit is for people earning less than $49,078 from wages, self-employment or farming. Millions of workers who saw their earnings drop in 2011 may qualify for the first time. Income, age and the number of qualifying children determine the amount of the credit, which can be up to $5,751. Workers without children also may qualify. For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, while you work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum credit is $1,000 for each qualifying child. You can claim this credit in addition to the Child and Dependent Care Credit. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

There are many other tax credits that may be available to you depending on your facts and circumstances. Since many qualifications and limitations apply to various tax credits, you should carefully check your tax form instructions.

Six Facts About Choosing the Standard or Itemized Deductions

When filing your federal income tax return, taxpayers can choose to either take the standard deduction or to itemize their deductions. The IRS has put together the following six facts to help you choose the method that gives you the lowest tax.

Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.

1. Standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2010, they are:

Single $5,700

Married Filing Jointly $11,400

Head of Household $8,400

Married Filing Separately $5,700

Qualifying Widow(er) $11,400

2. Some taxpayers have different standard deductions The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions. The standard deduction amount also depends on whether you plan to claim the additional standard deduction for a loss from a disaster declared a federal disaster or state or local sales or excise tax you paid in 2010 on a new vehicle you bought before 2010. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.

3. Limited itemized deductions Your itemized deductions are no longer limited because of your adjusted gross income.

4. Married Filing Separately When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.

5. Some taxpayers are not eligible for the standard deduction They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.

6. Forms to use The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. If you qualify for the higher standard deduction for new motor vehicle taxes or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

WASHINGTON — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.

Medical Savings Accounts (MSAs)          Self-only coverage          Family coverage

Minimum annual deductible                                  $2,100                                     $4,200

Maximum annual deductible                                 $3,150                                    $6,300

Maximum annual out-of-pocket expenses            $4,200                                     $7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.

Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

Miscellaneous Expenses

There are three types of expenses that are subject to the 2% limit. They are unreimbursed employee expenses, tax preparation fees and other expenses. For an explanation of deductible and nondeductible expenses refer to Publication 529, Miscellaneous Deductions.

Certain employee expenses are deductible as miscellaneous itemized deductions on Form 1040, Schedule A. Miscellaneous itemized deductions are subject to a 2% limit, which means you only can deduct certain expenses to the extent that they exceed 2% of your adjusted gross income.

For additional information, refer to the Form 1040, Schedule A Instructions, and Publication 529, Miscellaneous Deductions, or Publication 946, How To Depreciate Property. If you want more in-depth information about educational expenses, refer to Topic 513. For further information on employee business expenses, refer to Topic 511, and Topic 512.

Casualty, Disaster, and Theft Losses

A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.

A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent.

If your property is not completely destroyed, or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property or the decrease in fair market value of your property as a result of the casualty or theft. The adjusted basis of your property is usually your cost, increased or decreased by certain events such as improvements or depreciation. For more information about the basis of property, refer to Topic 703, or Publication 547, Casualties, Disasters, and Thefts. You may determine the decrease in fair market value by appraisal or, if certain conditions are met, by the cost of repairing the property. For more information, refer to Publication 547. Keep in mind the general definition of fair market value is the price at which property would change hands between a buyer and seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts.

If the property was held by you for personal-use, you must further reduce your loss by $100. This $100 reduction for losses of personal-use property applies to each casualty or theft event that occurred during the year. The total of all your casualty and theft losses of personal-use property must be further reduced by 10% of your adjusted gross income. In addition, individuals are required to claim their casualty and theft losses as an itemized deduction.

The National Disaster Relief Act of 2008 changed some of the tax rules pertaining to losses resulting from federally declared disasters. The new law, which is effective for losses attributable to disasters federally declared in taxable years beginning after December 31, 2007, and before January 1, 2010, provides the following:

Allows all taxpayers, not just those who itemize, to claim the net disaster loss deduction regardless of the taxpayer's adjusted gross income
Removes the 10 percent of adjusted gross income limitation for net disaster losses
Provides a 5-year net operating loss (NOL) carryback for qualified disaster losses
Changes the amount by which all individual taxpayers must reduce their personal casualty or theft losses for each casualty or theft event from $100 to $500. This applies to deductions claimed in 2009. The reduction amount returns to $100 for taxable years beginning after December 31, 2009

For more information on these tax law changes (including changes for business taxpayers), see Publication 547, Casualties, Disasters, and Thefts. Additional information can be found on the IRS Website at the following link: Tax Relief in Disaster Situations.

For individuals affected by the Midwestern Disasters, the Heartland Disaster Tax Relief Act of 2008 provides that losses of personal-use property that arose in identified disaster areas are generally not subject to the $100 reduction or 10% of adjusted gross income limitation. In other words, the entire amount of unreimbursed loss is deductible for a taxpayer who itemizes. For additional information specific to the Midwestern disasters see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas.

Casualty and theft losses are claimed on Form 4684 (PDF), Casualties and Thefts. Section A is used for personal-use property and Section B is used for business or income-producing property. If personal-use property was damaged, destroyed or stolen, you may wish to refer to Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property). For losses involving business-use property, refer to Publication 584B (PDF), Business Casualty, Disaster, and Theft Loss Workbook.

Casualty losses are generally deductible in the year the casualty occurred. However, if you have a deductible loss from a disaster in a federally declared disaster area, see Publication 547 and Publication 4492-B for additional information. Theft losses are generally deductible in the year you discover the property was stolen.

If you receive insurance or other reimbursement for your loss or expect to be reimbursed for all or part of the loss, you must subtract the amount when you figure your loss.

If your loss deduction is more than your income, you may have a net operating loss. You do not have to be in business to have a net operating loss from a casualty. For more information, refer to Publication 536, Net Operating Losses.

The IRS may postpone for up to one year certain tax deadlines of taxpayers who are affected by a federally declared disaster. The tax deadlines the IRS may postpone include those for filing income, estate, gift, generation-skipping transfer, certain excise, and employment tax returns, paying taxes associated with those returns, and making contributions to a traditional IRA or Roth IRA.

If the IRS postpones the due date for filing your return and for paying your tax and you are affected by a federally declared disaster area, the IRS may abate the interest on underpaid tax that would otherwise accrue for the period of the postponement.

Interest Expense

Interest is an amount you pay for the use of borrowed money. To deduct interest you paid on a debt you must be legally liable for the debt. Additionally, you generally must itemize your deductions, unless the interest is on rental or business property or on a student loan.

If you prepay interest, you must allocate the interest over the tax years to which it applies. You may deduct in each year only the interest that applies to that year. However, there is an exception that applies to points paid on a principal residence.

Types of interest you can deduct as itemized deductions on Form 1040, Schedule A include investment interest (limited to your net investment income) and qualified residence interest. You cannot deduct personal interest. Personal interest includes interest paid on a loan to purchase a car for personal use. Personal interest also includes credit card and installment interest incurred for personal expenses. Items you cannot deduct as interest include points (if you are a seller), service charges, credit investigation fees, and interest relating to tax–exempt income, such as interest to purchase or carry tax–exempt securities. For information on points, refer to Topic 504. For information on investment interest see Publication 17, Your Federal Income Tax.

You can deduct student loan interest on Form 1040 (PDF) or Form 1040A (PDF). For information on deducting student loan interest, refer to Topic 456.

Qualified residence interest is interest you pay on a loan secured by your main home or a second home. Your main home is where you live most of the time. It can be a house, cooperative apartment, condominium, mobile home, house trailer, or houseboat that has sleeping, cooking and toilet facilities.

A second home can include any other residence you own, and treat as a second home. You do not have to use the home during the year. However, if you rent it to others, you must also use it as a home during the year for more than the greater of 14 days or 10 percent of the number of days you rent it, for the interest to qualify as home mortgage interest.

Qualified residence interest and points are generally reported to you on Form 1098 (PDF), Mortgage Interest Statement, by the financial institution to which you made the payments. The following mortgages yield qualified residence interest and you can deduct all of the interest on these mortgages:

A mortgage you took out on or before October 13, 1987 (grandfathered debt)
A mortgage taken out after October 13, 1987, to buy, build, or improve your home, (called home acquisition debt) but only if this debt plus any grandfathered debt totals $1 million or less throughout 2009. The limit is $500,000 if you are married filing separately.
A mortgage taken out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if these mortgages total $100,000 or less throughout 2009, and all mortgages, including any grandfathered debt and home acquisition debt, on the home, total no more than your home's fair market value. The limit is $50,000 if you are married filing separately.

If one or more of your mortgages does not fit into any of these categories, refer to Publication 936, Home Mortgage Interest Deduction, to figure the amount of interest you can deduct.

You may be able to take a credit against your federal income tax if you were issued a mortgage credit certificate by a state or local government for low income housing. Use Form 8396 (PDF), Mortgage Interest Credit, to figure the amount. For further information, please refer to Publication 530, Tax Information for Homeowners. For information on the First-time Homebuyers Credit, refer to Topic 612.

You may be subject to a limit (phaseout) on some of your itemized deductions including mortgage interest. For more information on the limitations based on the adjusted gross income please refer to the Form 1040 Instructions.

Deductible Taxes

There are five types of deductible nonbusiness taxes:

State, local and foreign income taxes
Real estate taxes
Personal property taxes
State and local sales taxes, and
Qualified motor vehicle taxes

To be deductible, the tax must be imposed on you and must have been paid during your tax year. However, tables are available to determine your state and local general sales tax amount for 2008. Refer to Form 1040 Instructions for more information. Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A.

State and local income taxes withheld from your wages during the year appear on your Form W-2 (PDF). The following amounts are also deductible:

Any estimated taxes you paid to state or local governments during the year, and
Any prior year's state or local income tax you paid during the year.

Generally, you can take either a deduction or a tax credit for foreign income taxes imposed on you by a foreign country or a United States possession. For information regarding the foreign tax credit, refer to Topic 856. As an employee, you can deduct mandatory contributions to state benefit funds that provide protection against loss of wages. Refer to Publication 17 for the states that have such funds.

Deductible real estate taxes are generally any state, local, or foreign taxes on real property. They must be charged uniformly against all property in the jurisdiction and must be based on the assessed value. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks, and sewer lines. These taxes cannot be deducted. However, you can increase the cost basis of your property by the amount of the assessment. Refer to Publication 551, Basis of Assets, for more information. Local benefits taxes are deductible if they are for maintenance or repair, or interest charges related to those benefits.

If a portion of your monthly mortgage payment goes into an escrow account, and periodically the lender pays your real estate taxes out of the account to the local government, do not deduct the amount paid into the escrow account. Only deduct the amount actually paid out of the escrow account during the year to the taxing authority.

Deductible personal property taxes are those based only on the value of personal property such as a boat or car. The tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year.

Taxes and fees you cannot deduct on Schedule A include Federal income taxes, social security taxes, stamp taxes, or transfer taxes on the sale of property, homeowner's association fees, estate and inheritance taxes and service charges for water, sewer, or trash collection. You may be subject to a limit on some of your itemized deductions including nonbusiness taxes. Please refer to the Form 1040 Instructions for the limitations based on the adjusted gross income.

Generally, sales taxes are not deductible on Schedule A. However, for Tax Years 2005, 2006, 2007, 2008, and 2009 if you file a Form 1040 and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes (you can't claim both). If you saved your receipts throughout the year, you can add up the total amount of sales taxes you actually paid and claim that amount. If you didn't save all your receipts, you can choose to claim a standard amount for state and local sales taxes. Its easy if you use the Sales Tax Deduction Calculator on IRS.gov for either year (refer to Publication 600 and Form 1040 Instructions).

Also, you may be able to deduct state and local sales or excise taxes you paid after February 16, 2009, for the purchase of any new motor vehicles(s). You may deduct these taxes on Form 1040, either as an addition to your standard deduction, or on Schedule A, if you elect to itemize your deductions. However, if you make an election to deduct state and local general sales taxes instead of state and local income taxes on Schedule A, you can only deduct any state and local taxes you paid on the purchase of a new motor vehicle as part of your total state and local general sales tax deduction. Please refer to the Form 1040 Instructions for limitations based on vehicle price, vehicle types, and income qualifications.

For more information on nonbusiness deductions for taxes, refer to Publication 17.