8. Energy and Appliance Tax Credit applies to taxpayers who made energy-efficiency improvements to their homes in 2011. You may be eligible for a tax credit of 10 percent for the cost, up to a maximum of $500. Approved improvements include new windows, insulation, high efficiency furnaces, water heaters and air conditioning, among many others, but you will need your receipts and manufacturer certification as back-up. (Energy Star has a list of items that qualify for the tax deduction).
College Costs
There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit. To qualify for either credit, you must pay post-secondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit. For each student, you can choose to claim only one of the credits in a single tax year. However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis.
9. The American Opportunity Tax Credit: Each student can now get a $2,500 "higher education tax credit" for the first four years of college. The credit is based on 100 percent of the first $2,000 of tuition and related expenses, including books, paid during the tax year, plus and 25 percent of the next $2,000 of tuition and related expenses paid during the tax year (subject to income phase-outs starting at $80,000 for singles and $160,000 for joint filers).
10. Lifetime learning credit: The credit can be up to $2,000 per eligible student and is available for all years of post-secondary education and for courses to acquire or improve job skills. The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.
11. Tuition and Fees Deduction: Every family can deduct up to $4,000 of college tuition and fees in 2011. If your modified AGI is between $65,001 and $80,000 for singles or between $130,001 and $160,000 for joint filers, you are entitled to a reduced deduction of up to $2,000. (IRS Publication 970)
Add Up Those Itemized Deductions
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. Some of those folks are leaving money on the table. If your deductible expenses exceed the 2011 standard deduction of $5,800 (up $100 from 2010) for singles and married individuals filing separately and $8,500 for heads of household, also up $100 and $11,600 for married couples filing jointly, be sure you itemize and grab these write-offs.
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12. Miscellaneous deductions: These are deductible if they total more than 2 percent of your adjusted gross income. They include tax-preparation fees, job-hunting expenses, business car expenses and professional dues.
13. Sales tax: You can deduct sales tax paid in 2011 if the amount was greater than the state and local income taxes you paid. In other words, you get to choose: Write off your sales taxes or write off your income taxes. If you didn't keep your sales-tax receipts, use the IRS's sales tax deduction estimator. Even if you claim the sales tax amount from the IRS tables, you can add in tax paid on vehicles or boats purchased during the year, except to the extent the sales tax rate on them is more than the general sales tax rate. If you live in a state with a high income tax, like California or New York, you will probably be better off claiming your state and local income taxes rather than sales taxes. If you live in a state with no income tax, like Florida, Texas, or Washington, be sure to take the sales tax deduction when you itemize.
14. Medical expenses: This one is hard to claim, because the bar is so high to qualify. You can only deduct the portion of your 2011 medical expenses that exceed 7.5 percent of your adjusted gross income. (IRS Publication 502)
15. Mileage: Deducting miles driven for work or other purposes can be a huge tax break and save you significant money. The IRS increased the mileage deduction amounts for 2011: Business mileage = 51 cents per mile from January 1 to June 30, and 55.5 cents per mile from July 1 to December 31, 2011; medical and moving = 19 cents per mile from January 1 to June 30, and 23.5 cents per mile from July 1 to December 31, 2011; and charitable = 16 cents per mile.
16. Mortgage insurance deduction: Borrowers with AGI's up to $100,000 may be able to treat qualified mortgage insurance as home mortgage interest, which means that 100 percent of 2011 premiums may be deductible. The insurance contract had to be issued after 2006 and deductions are phased out in 10 percent increments for homeowners with AGI's between $100,001 and $109,000. (IRS Publication 936)
17. Enhanced adoption credits: As part of the Patient Protection and Affordable Care Act (March 2010), the Adoption Tax Credit was extended one year until Dec. 31, 2011, the amount of credit was increased to $13,360 and it was made refundable, meaning that families can benefit even if they have less than $13,360 of federal income tax liability. If adoption expenses have been paid for by an employer, you may qualify to exclude up to $13,360 from income. The credit is subject to income phaseouts from $185,210 to $225,210 in AGI. (IRS Topic 607)
18. Classroom deduction for teachers: K-12 educators who work at least 900 hours during the school year can claim an above-the-line deduction of up to $250 ($500 if married filing joint and both spouses are educators, but not more than $250 each) of any unreimbursed expenses (books, supplies and computer equipment -- including related software and services -- other equipment, and supplementary materials) used in the classroom. (IRS Topic 458)
