I’m a big believer in the idea that as tax payers, it is our civic duty to pay the lowest taxes possible. I’m not suggesting tax evasion, jail time shouldn’t be a possible side effect here. But if the tax system offers a possibility to lower your taxes, take advantage of it.
If you disagree, you’re more than welcome to donate as much as you like. I use Turbotax to keep mine as low as possible. That’s because the over complexity of the current tax system it’s nearly impossible to keep up with all the yearly changes.
So with that in mind, here are two potential tax savings opportunities to keep in mind come tax time. The first, if you’ve had to move due to work, you may be able to deduct some of those moving expenses. The second, with the annual back-to-school exodus, there are several credits and deductions available that may help offset those yearly costs.
Moving Tax Savings
Summer is a great time to take advantage of big moves. The kids are out of school and who really wants to move in the dead of winter. If that move is job related, there are a few deductions available that can help offset some of those moving costs so save your receipts.
A few requirements need to be met before any deductions may be considered. The move must be closely related to the start of work. The new job location has to be at least 50 miles farther from your former home than your previous work place was. You must work full time for 39 weeks of the first year at your new home or 78 weeks of the first two years if you are self employed.
- Travel Costs – you can deduct lodging expenses for you and your family. Included is transportation expenses, like airfare, vehicle mileage, parking and toll fees. You can only deduct one trip per person, so make that one trip count.
- Packing and Shipping Costs – you can deduct the cost of packing, crating and transporting all your personal and household items. You may even be able to include the cost of storage and insuring those items while in transit.
- Utilities Connection Costs – you can deduct the costs of connecting and disconnecting utilities.
A few things to note. If your employer reimburses you for the cost of the move, that reimbursement may have to be added to your income tax return. And lastly, don’t forget to update your address with the IRS using Form 8822.
Back-to-School Tax Savings
It’s back-to-school time and with it comes all the expenses associated with another school year. Most of the credits and deductions are towards college costs. With money being spent on tuition, fees, books, computers and more, our tax system offers several opportunities to deduct or get credit for some of those costs if you meet the income requirements. Make sure to save your receipts for any education expenses.
- American Opportunity Credit – was extended for 2011 and 2012. The credit is for up to $2,500 per eligible student for the first four years of post secondary education. Qualified expenses include tuition, fees, books, supplies and other equipment and is available to individuals with a modified adjustable gross income less than $80,000 ($160,000 for married filing jointly). Owe no taxes, 40% of the credit is refundable, which is up to $1,000.
- Lifetime Learning Credit – is a 2011 credit for up to $2,000 for qualified education expenses paid for students enrolled in qualified educational institutions. There is no limit on the number of years you can claim the credit, but your individual modified adjustable gross income must be below $60,000 ($120,000 for married filing jointly).
- Tuition And Fees Deduction – reduces the amount of your taxable income by up to $4,000 in 2011. You can claim the tuition and fees deduction for higher education expenses if your individual modified adjustable gross income in below $80,000 ($160,000 married filing jointly).
- Student Loan Interest Deduction – if you have student loan payments, you can deduct up to $2,500 in interest paid from your taxable income if your individual modified adjustable gross income is below $75,000 ($150,000 married filing jointly).
You can only claim one credit/deduction per student, per year. So trying to claim the tuition and fees deduction and American Opportunity Credit for the same student won’t work. Figure out which credit or deduction puts more money back in your pocket and go with it.
With anything tax related remember to save any receipts if you qualify for any of these deductions. And make sure to talk to a tax pro if you have any questions or concerns with your annual tax returns.