It's easy to miss some valuable tax write-offs that could save you hundreds or thousands of dollars when you file your tax return this year. Whether you pay for child care, save for retirement, do some freelance work, have a kid in college, take continuing education classes or have a high-deductible health insurance policy, you may be eligible for some frequently overlooked tax credits or deductions.
Even if you know the basic tax rules, you may not be aware of some nuances that could save you extra money on your 2019 return. You can even file an amended return and get more money back if you missed some of these breaks in the past three years:
-- Tax breaks for child care and summer camp.
-- Extra credit for saving.
-- Tax breaks for college costs.
-- Tax credit for continuing education.
-- Tax-deductible contributions to a health savings account.
-- A break for teachers.
-- Tax breaks for freelancers.
Tax Breaks for Child Care and Summer Camp
You can claim the child care tax credit if you have children under age 13 and pay for child care while you and your spouse work (or if one of you works and the other spouse is a full-time student). This credit can be worth 20% to 35% of up to $3,000 in child care expenses if you have one eligible child, or up to $6,000 in expenses for two or more children.
The lower your income, the larger the credit. There's no maximum income limit -- if you earn more than $43,000, the credit can still be worth up to $600 if you have one eligible child or up to $1,200 for two or more children. The cost of day care, a nanny, preschool (before kindergarten) and before- and after-school programs can count. You can include the cost of summer day camp your child attends so you can work -- even if the camp specializes in a particular activity, such as computers or soccer, says David Desmarais, a certified public accountant and financial planner at KLR, a Boston-based accounting firm. Overnight camps don't count.
To claim the credit, file Form 2441 with your tax return. You can't claim the credit for any expenses you paid from a dependent-care flexible spending account at work.
Extra Credit for Saving
If you contribute to a 401(k), IRA or other retirement savings plan, you may qualify for the saver's credit on top of any deduction you get for your contributions. To qualify for 2019, your adjusted gross income must be less than $64,000 if married filing jointly, $48,000 for head of household or $32,000 if single. The credit can be worth up to $1,000 per person ($2,000 for married couples) at the lowest income levels. You can claim the credit by filing Form 8880 with your income tax return.
People who earned more than the cut-off when they were working often forget to check their eligibility if their circumstances change. "Many full-time workers earn too much to qualify, but it's worth a look if you've scaled back to part-time work or perhaps one spouse has retired," says Neal Stern, a CPA in Deer Park, New York, and member of the American Institute of CPAs' Financial Literacy Commission. You have until April 15, 2020, to contribute up to $6,000 to an IRA for 2019 (or $7,000 if you were 50 or older), as long as you or your spouse earned money from working during the year.
Young adults often overlook this tax break, too. To qualify for the saver's credit, you must be 18 or older, can't be a full-time student and can't be a dependent on somebody else's tax return. But it can be a valuable break for people in their 20s who are just getting started in their careers and need an extra incentive to save for the future, says Michelle Morris, a certified financial planner and enrolled agent in Quincy, Massachusetts. She often recommends that clients help their working children contribute to a Roth IRA, which can grow tax-free for retirement.
Tax Breaks for College Costs
College is expensive, but the American opportunity tax credit can help you save up to $2,500 per student. To qualify, your modified adjusted gross income for 2019 must be less than $90,000 for single and head of household filers, or less than $180,000 for joint filers. The student must be enrolled at least half-time in a program leading to a degree, certificate or other recognized educational credential. Money spent on tuition, fees and books counts toward the credit -- even required books you buy from an off-campus bookstore, says Desmarais. Room and board doesn't count.
Tax Credit for Continuing Education
If you or your dependent child is in graduate school, or just taking a few classes toward a degree, or even if you're paying for continuing education classes to help with your job skills, then you may be eligible for the lifetime learning credit, which can be worth up to $2,000 per return. The courses must be offered by a college, vocational school or other postsecondary educational institution that is eligible to participate in the U.S. Department of Education student aid program. The credit is calculated as 20% of the first $10,000 of tuition, fees and other required expenses. Your modified adjusted gross income must be less than $68,000 if single or filing as head of household, or less than $136,000 if married filing jointly to qualify for 2019.
Tax-Deductible Contributions to a Health Savings Account
If you had an HSA-eligible health insurance policy in 2019 (with a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage), then you can still make tax-deductible contributions to an HSA. You have until April 15, 2020, to contribute up to $3,500 if you had self-only coverage or up to $7,000 for family coverage, plus $1,000 if you were 55 or older. You can use the money tax-free for eligible medical expenses in any year -- even after you retire.
A Break for Teachers
Teachers in kindergarten through 12 th grade can deduct up to $250 for books, school supplies and other items they buy themselves for their classroom, says Stern.
Tax Breaks for Freelancers
Whether you're self-employed or just do some freelance work on the side, you may be eligible for several overlooked breaks. If you drive to visit clients, attend meetings or do other work-related driving, you can deduct 58 cents per mile in 2019 as a business expense (commuting doesn't count). "There are apps that make it really easy to track," says Morris, who uses the Everlance app. "It records every trip I take in my car, and I swipe one way for work and the other way for not work, and it creates a spreadsheet that you can export to your tax preparer. The first year I used that app, my business mileage went up by 30%."
You still have until April 15, 2020, to make a tax-deductible contribution to a Simplified Employee Pension based on your 2019 business income. You can contribute up to 20% of your net earnings from self-employment, up to $56,000, which grows tax-deferred for retirement. You can open an SEP at most brokerage firms and banks.
If you missed any tax breaks in the past, you generally have three years after the tax-filing deadline to file an amended return and get a refund. File Form 1040X, enter the year of the return you are amending, fill in the new numbers and attach any tax forms that are affected by the change.
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