23 tax credit deductions you my not no about! Page 2

16.  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)

17.  Estate tax on income in respect of a decedent: This sounds complicated, but it can save you a lot of money if you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax. Basically, you get an income-tax deduction for the amount of estate tax paid on the IRA assets you received. Let's say you inherited a $100,000 IRA, and the fact that the money was included in your benefactor's estate added $35,000 to the estate-tax bill. You get to deduct that $35,000 on your tax returns as you withdraw the money from the IRA. If you withdraw $50,000 in one year, for example, you get to claim a $17,500 itemized deduction on Schedule A. That would save you $4,900 in the 28% bracket.

23 tax credit deductions you my not no about18. Out-of-pocket charitable contributions: It's hard to overlook the big charitable gifts you made during the year, by check or payroll deduction (check your December pay stub). But the little things add up, too, and you can write off out-of-pocket costs incurred while doing work for a charity. For example, ingredients for casseroles you prepare for a nonprofit organization's soup kitchen and stamps you buy for your school's fundraising mailing count as a charitable contribution. Keep your receipts and if your contribution totals more than $250, you'll need an acknowledgement from the charity documenting the support you provided. If you drove your car for charity in 2012, remember to deduct 14 cents per mile plus parking and tolls paid in your philanthropic journeys.

19.  Military reservists' travel expenses: Members of the National Guard or military reserve may tap a deduction for travel expenses to drills or meetings. To qualify, you must travel more than 100 miles from home and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for driving your own car to get to and from drills. For 2012 travel, the rate is 55.5 cents a mile, plus what you paid for parking fees and tolls.

20.  Contact lenses: Contact lenses are tax deductible but, "very few taxpayers get to deduct them because you get to deduct such costs only to the extent that unreimbursed expenses exceed 7.5 percent of your Adjusted Gross Income (AGI)." This means that if your AGI is $50,000, for example, you would have to spend over $3,750 in doctor fees to qualify for this exemption. These contact lenses must be for medical reasons. Colored lenses to get a majestic glare, made famous by Edward from Twilight, are taxable. But, according an IRS publication, "You can also include the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner."

21.  Home improvements that save energy You could get up to 100 percent tax credit on certain garden variety energy saving home improvements for your primary residence. Although the cap on this break is $500, it is not contingent on your income. Even though this tax credit seems lucrative, it has drastically been cut since 2010. The cap used to be $1,500 but was amended since Obama extended the Bush-era tax cuts.

22. Moving costs for your first job IRS Topic 455 states, "If you moved due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonable moving expenses but not any expenses for meals." This IRS status specifies that to qualify for this deduction, "your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home," and, "if you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location." Special rules also apply to international and military moves. Also, recent graduates are not yet eligible for this tax break.

23.  Job-hunting costs like cab fares, food, lodging and transportation According to Bankrate, tax deductible job-hunting costs include, "Employment and outplacement agency fees, resume services, printing and mailing costs of search letters, want-ad placement fees, telephone calls and travel expenses." Even though this list seems exhaustive, there are some limitations to keep in mind. First, this law only applies if you are looking for a new job in the same field. If you are an ex-lawyer looking to relocate to Los Angeles to live your childhood film producer dreams, you are out of luck!

Also, these benefits don't apply to recent graduates who have never yet contributed to the internal revenue pie.This law is stern and you must remember to show receipts as well a detailed log of your travels. The IRS is scrupulous about making sure that you are actively searching for a job, not just vacationing with friends and family while dropping off resumes.

24.  Reinvested dividends This isn't really a tax deduction, but it is an important subtraction that can save you a bundle. And this is the break that former IRS commissioner Fred Goldberg told Kiplinger's that a lot of taxpayers miss. If, like most investors, your mutual fund dividends are automatically used to buy extra shares, remember that each reinvestment increases your tax basis in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include the reinvested dividends in your basis results in double taxation of the dividends -- once when they were paid out and immediately reinvested in more shares and later when they're included in the proceeds of the sale. Don't make that costly mistake. 

If you're not sure what your basis is, ask the fund for help. (Starting with sales in 2012, mutual funds must report to investors -- and the IRS -- the tax basis of shares redeemed during the year. But note this: The new rule applies only to shares purchased in 2012 and later years. If you redeemed shares you purchased prior to 2012, it's still up to you to figure your basis. Don't forget  

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