Helpful List of Tax Credits And Tax Deductions

Top Ten Credits/Deductions That May Save You Tax Dollars 
 
Appleton, WI  54912-8002   -  March 28 2006 – As our parents used to tell us when we were young, “Every little bit helps.” Of course, they were referring to putting money in the piggy bank, but the sage advice can also apply to saving money on your tax returns. Here is a quick list of tax credits and deductions to check out before sending in your tax return so you don’t miss any opportunities to save.

 

1) Earned Income Tax Credit (EITC) – This credit applies to low-income, employed individuals and families. The credit is based on income and family size, and if the EITC amount exceeds the owed amount, it may result in a refund for those who qualify.

 

2) Child and Dependent Care Credit – This credit is for care expenses for children under age 13 or for a disabled spouse or dependent, so that a taxpayer can go to work. It is subject to limitations.

 

3) Child Tax Credit – The maximum amount of this credit is $1,000 for each qualifying child and can be used in combination with the Child and Dependent Care Credit.

 

4) Adoption Credit – If you are an adoptive parent, you may be eligible for a credit of up to $10,630 of qualifying expenses for a qualifying child. For special needs children, you do not need to meet the qualifying expense criteria.

 

5) Educator Expense Deduction – Those who are employed as educators through grade 12 and teach at least 900 hours in a year may receive a deduction for up to $250 for unreimbursed expenses used for the sake of the children.

 

6) Education Credits – Two credits are available for those who pay higher education costs – the Hope Credit and the Lifetime Learning Credit. The Hope is for payment of the first two years of tuition for eligible students you claim on your tax return, and Lifetime Learning is for all post-secondary education tuition for an unlimited number of years. Taxpayers cannot claim both credits for the same student in one tax year, and the credit can be claimed only on the return declaring the student as a dependent.

 

7) Medical and Dental Deductions – Qualified expenses for all of your claimed dependents (including any dependents deceased during the tax year) count toward your eligible deduction. Eligible expenses include insurance premiums, uninsured medical expenses, treatments not covered by insurance, travel for medical care, medically necessary equipment, and more.

 

8) Health Coverage Tax Credit – This new tax credit can pay up to two-thirds of health plan premiums for individuals who lost their jobs due to the effects of international trade and meet certain criteria, and those who receive benefits from the Pension Benefit Guaranty Corporation (PBGC) and are at least 55 years old.

 

9) Credit for the Elderly and Disabled – If you are a U.S. citizen or resident age 65 or older, and retired on permanent and total disability, look into this credit.

 

10) Retirement Savings Contribution – For those with qualified retirement savings contributions including traditional IRAs, Roth IRAs, SEPs, or SIMPLE plans, a percentage of contributions may help you save on your taxes. Taxpayers who are at least age 18 at year-end, not a student or claimed on someone else’s tax return as a dependent, are eligible for this credit if income is below a specified amount. FYI, you can still contribute to an IRS for 2005 up until April 17, 2006.

 

If all of these credits and deductions have you scratching your head in confusion, don’t worry. A reputable tax preparer can help, often for little more than the cost of tax software and the charge for e-filing, plus you don’t have to do the work! Professional tax preparers are experts who keep up-to-date year-round on tax law changes. They can save you time and offer insight on how to use the tax breaks available to you. To find a professional tax preparer, look to NATP. NATP maintains a listing of professionals in your area at www.taxprofessionals.com.

 

To receive a FREE brochure on how to find a tax preparer, visit the NATP Press Room at www.natptax.com and download a copy of NATP’s “Finding the Right Tax Preparer” brochure.

 

Members of the National Association of Tax Professionals (NATP) assist over eight million taxpayers with tax preparation and planning. NATP is a nonprofit professional association founded in 1979 and provides professional education, tax research, and products to its members. The national headquarters, located in Appleton, WI, employs 43 professionals and 25 instructors.

 

NATP exists to serve professionals who work in all areas of tax practice and has more than 17,500 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation or a college degree. Learn more at www.natptax.com.

 

Would you like a photo to accompany this article? Visit NATP’s press room: http://www.natptax.com/press_room_photos.html.

 

# # end # # 
 
Char De Coster (cdecoster@natptax.com)
Copywriter / Communications Editor
National Association of Tax Professionals (NATP)
720 Association Drive, PO Box 8002
Appleton, WI   54912-8002
Phone : 800.558.3402 ext. 1172
Fax : 920.968.7472