Deductions & Credits
Deductions and Credits can increase your refund or reduce the tax you owe. This is the part why you need a qualified tax preparer when filing your taxes. There are some important facts to why you should be carefull when choosing a tax preparer on this website.
Deductions matter the most to reduce your tax bill and must be done carefully and correct on your tax return. Record keeping of your expenses through out the year is crutial to calculate your deductions. Understand that we will request to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so we have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination. Here is a list of main deductions you can use in your tax returns:
Home Office
We need rent or mortgage statements, utilities, renters insurance or home owners insurance.
Auto
We need make,year and model, mileage logs, gasoline receipts.
Travel
We need air, bus, train...... receipts, lodging receipts, any other travel expenses. Sorry but you can't include your trip expences for the poker tournament you attended in Vegas.
Food and Entertainment
Any receipts for those categories related to finding or doing studies.
Postage & Shipping
Any postage or shipping expenses related to finding or doing studies.
Office Supplies
Any office supplies you purchase related to with finding or doing studies
Utilities
Cell phone, Internet bills -Again anything to do with finding or doing studies.
Vitamins, gym fees, things to stay healthy
Again anything to do with finding or doing studies.
Professional Fees
Tax preparation fees/financial planning fees.
Supplies
Such as a bike, free weights...-Again anything to do with finding or doing studies.
Tax Credits are available to people at all income levels, tough some have income restrictions. These include the EITC, saver’s credit, education credits and child tax credit. Tax Credit is generally more valuable than a tax deduction of the same magnitude because a tax credit reduces tax directly, while a deduction or allowance only reduces taxable income and so the reduction in tax is only a fraction (the marginal tax rate) of the deduction or allowance. Tax Credits may be characterized as either refundable or non-refundable. Refundable tax credits can reduce the tax owed below zero, and result in a net payment to the taxpayer beyond their own payments into the tax system, appearing to be a moderate form of negative income tax. Here is a list of common Tax Credits you can claim:
Earned Income Tax Credit (EITC)
Benefit paid to us through the tax system, which has the effect of increasing (rather than reducing) net income. EITC is a refundable federal income tax credit for low to moderate income individuals and families. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. You can find out if you are eligible here. You must be over 25 years of age to be able to take this credit.
Child Tax Credit
If you have a dependent child under age 17 you probably qualify for the child tax credit. This credit, which can be as much as $1,000 per eligible child, is in addition to the regular $3,400 exemption you can claim for each dependent. Don’t confuse the child tax credit with the child care credit. For details on figuring and claiming the child tax credit, see IRS Publication 972.
Credit for Child and Dependent Care Expenses
If you pay someone to care for your child so you can participate in a medical research study or go to screening for a study, you probably qualify for this credit. Normally, your child must be your dependent and under age 13. Though often referred to as the child care credit, this credit is also available if you pay someone to care for a spouse or dependent, regardless of age, who is unable to care for himself or herself. In most cases, you need to obtain the care provider’s social security number or taxpayer identification number and enter it on your return. See our Privacy Policy
Making Work Pay Credit
You are eligible to take this credit because you have earned income from doing clinical research studies. The credit is 6.2% of your earned income but cannot be more than $400 ($800 if married filing jointly).
Saver’s Credit
The saver’s credit helps low-and moderate-income workers save for retirement. You probably qualify if your income is below certain limits and you contribute to an IRA or workplace retirement plan, such as a 401(k). Income limits for 2007 are $26,000 for singles and married filing separately, $39,000 for heads of household and $52,000 for joint filers.
Education Credits
The Hope credit and the lifetime learning credit help parents and students pay for post-secondary education. Normally, you can claim tuition and required enrollment fees paid for your own, as well as your dependents’ college education. The Hope credit targets the first two years of post-secondary education, and an eligible student must be enrolled at least half time. You can take the lifetime learning credit, even if you’re only taking one course.
Energy-Saving Tax Credits
You can take a credit based on what you spend on various energy-saving improvements made to your main home. New energy-efficient improvements qualify, including insulation, exterior windows, exterior doors, water heaters, heat pumps, central air conditioners, furnaces and hot water boilers. The overall credit is limited to $500 and further dollar limits apply to specific components –– for example, $200 for windows. If you took the full $500 credit in 2006, you cannot claim the credit in 2007, even if you made qualifying energy-saving improvements.
Tax Credits Can Save You Money
If you qualify, you can claim any credit, regardless of whether you itemize your deductions. Any credit can be claimed on Form 1040, sometimes referred to as the long form. Alternatively, except for the energy credits, all the credits outlined in this fact sheet can be claimed on the 1040A short form. The EITC can even be claimed on Form 1040EZ. The instruction booklet for each of these forms has more information about these and other tax credits.
Compliments of the IRS website