13 tax tips that could save money, headaches

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Posted: Monday, April 14, 2014 12:00 am

We’re in the last couple of days to get tax returns in, and here are our 13 lucky tips for 2013 returns. Some might save you a little money; some might save a few headaches.

>> Did your child attend day camp last summer? What does that have to do with taxes? If you’re working, the cost of day camp can count as an expense toward the Child and Dependent Care Credit. The expenses must be needed so you and your spouse, if filing jointly, could work or look for work. The child must be younger than 13 when the care was provided. The credit could be 20 percent to 35 percent, up to $3,000, of work-related expenses for one child; or $6,000 for two or more. On the 2013 return, your adjusted gross income can be more than $43,000 but at that income the percentage used to calculate the credit is 20 percent.

>> Do you have college-age children? Or did you head back to college yourself? The American Opportunity Credit is worth up to $2,500 per eligible college student. The Lifetime Learning Credit can apply for college students, graduate school and professional degrees. Income limits and other rules apply. Get Form 1098-T to show the student attended an eligible institution.

>> Casualty losses are generally deductible in the year the casualty occurred, but not always. Barbara Weltman, author of “J.K. Lasser’s 1,001 Deductions and Tax Breaks 2014,” noted there are some cases where you can take the disaster loss in the preceding tax year, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance.

>> Don’t overlook a zero-percent rate on long-term capital gains. Yes, it’s a limited tax benefit that applies in 2013 for married couples with a taxable income of $72,500 or less; the limit is $36,250 for single filers. If you hold onto stock for longer than 12 months, you can benefit from a reduced tax rate on long-term capital gains. But remember, your taxable income is going to include capital gains.

>> The rules haven’t changed, but there is a new simplified method for 2013 returns for figuring out a home office deduction. Mark Steber, chief tax officer at Jackson Hewitt, said many taxpayers who own a small business or work from home may qualify for a home office deduction but don’t take it because of the complexity. The new method might help. The office area must be used on a regular basis for business and be either for the convenience of the employer, or used by a self-employed person to meet clients.

The space must be used exclusively for the business; it can’t be used to store seasonal decorations, as a guest room or entertainment room.

>> Do you have an adjusted gross income of $58,000 or less? The Free File program offered via the Internal Revenue Service website connects tax filers to free software to prepare and file taxes online. See IRS.gov.

>> It’s OK, really, to hang up on the IRS. Ignore fraudsters who are claiming to be from the IRS and demanding money or promising refund money.

>> Slow down. Did you review all the Social Security numbers on your return? Double-check the math. Mistakes can delay refunds.

>> Running late? See Form 4868 for an automatic six-month extension until Oct. 15. If you qualify, this form does not give you more time to pay taxes. If you do not pay the amount due by the regular due date, the IRS notes, you will owe interest and possibly penalties.

>> Did you pay for private mortgage insurance? The PMI premiums could be deductible if your adjusted gross income didn’t exceed $109,000 in 2013 and if you took out that mortgage in 2007 or after.

>> Alternative motor vehicle credits can be confusing. IRS publications note upfront that the Plug-In Electric Vehicle Credit has expired. But these credits have different names and rules. And the Plug-In Electric Drive Motor Vehicle Credit still applies to cars like the Chevrolet Volt and has not expired. We’re looking at a potential $7,500 federal tax credit.

>> Cash any U.S. savings bonds in 2013? Typically, interest is taxable on federal returns, but not on the state income tax return. Some very complex rules give you a shot at being able to exclude income on federal taxes, if the savings bonds were cashed in the same year that the money was used for college tuition. The college-education related tax benefit would apply to a Series EE bond issued in 1990 or after or a Series I Bond if modified adjusted gross income is less than $142,050 for those married filing jointly. Another twist: The bond owner listed on the bond must be at least 24 years old before the bond’s issue date. If you claim the exclusion, the IRS warns that it will check it against bond redemption information from the Department of Treasury. You’d have to pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return. So grandparents cannot use the tax benefit unless the grandchild is their dependent.

>> Use direct deposit for refunds, but give the correct routing number and bank account information. The IRS says a taxpayer’s refund should be deposited directly only into accounts that are in the taxpayer’s own name, the taxpayer’s spouse’s name or both names. Taxpayers can split refunds into different accounts or purchase paper Series I savings bonds for themselves or family members with refunds. See Form 8888.

Contact the writer: stompor@freepress.com

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