Local CPA gives tips on making the most of tax deductions - WREX.com – Rockford’s News Leader

Local CPA gives tips on making the most of tax deductions

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Tax time is here, whether we're ready for it or not, and a local CPA has some tips on how to make the most out of your deductions.

Depending on your situation, it's often beneficial to consult a Certified Public Accountant rather than try to do your taxes on your own. CPA Scot Dobbs recommends business owners, and those with real estate or other complicated investments could benefit from seeing a CPA.

There are also several deductions available to residents that can often be overlooked. They include:

  • Child Tax Credit: Credit of up to $1,000 for every qualified dependent child under the age of 17 at the end of 2012. Credit begins to phase out at $75,000 income mark for single-filers or $110,000 for joint-filers with a reduction of $50  for every $1,000 the taxpayer is above those amounts.
  • Child and Dependent Care Credit: Credit of up to $3,000 (or $6,000 for two or more qualifying children) for a child under the age of 13 at the end of 2012 or a dependent requiring care. Care for the child or dependent must have been provided so the filer or a spouse could work or look for work.
  • Adoption Tax Credit: Those who adopted a child in 2012 and paid for the expenses out-of-pocket could get a credit up to $10,000 depending on the expenses. Credit phases out for taxpayers at an income of $189,710.
  • American Opportunity Tax Credit: Credit of up to $2,500 per eligible college student for qualifying tuition, fees, and course materials expenses. Individual students could be eligible if no one claims them as dependents. Can be claimed for up to the first four years of a student's post-secondary education.
  • Teacher's Classroom Expense Deduction: For kindergarten through twelfth-grade teachers with qualifying un-reimbursed classroom expenses like books, supplies, and computer equipment. Possible deduction of up to $250.
  • Mortgage Interest Deduction: Any mortgage interest payments made in 2012 may be deductable. The interest on up to $1 million in home acquisition debt and up to $100,000 of a home equity line of credit can be deducted.
  • Mortgage Debt Forgiveness Act: If the filer had mortgage debt forgiven due to a mortgage adjustment, foreclosure, or short sale in 2012, the act allows their qualified debt income of up to $2 million to be excluded from their total income.
  • Residential Energy Efficient Property Credit: If the filer made any energy efficient home improvements to their principal residence in 2012 such as insulation or new energy-efficient exterior windows or heating systems, they may qualify for a credit of up to 30 percent of the cost of all qualifying improvements up to $500. The credit is a lifetime credit so once it is claimed once, it cannot be claimed again.
  • Traditional IRA Contribution Deduction: Contributions to a Traditional IRA may be deductible. If the IRA is through the filer's employer, the deduction amount may be limited based on income. Those who make $58,000 or less ($92,000 or less for married filers) are entitled to a deduction of the full contribution amount up to the limit. If the income is higher in either category, there will be a phase-out of deduction eligibility. If the plan is not sponsored by an employer, the deduction is the full contribution amount with no income phase-out. The contribution amount is generally limited to the greater of earned income for the year or $5,000 ($6,000 if the filer is 50 or older).
  • Health Savings Accounts: Contributions to a Health Savings Account through April 15, 2013 are eligible to be deducted from the filer's 2012 gross income up to the contribution limits of $3,100 for single-filers and $6,250 for families (filers 55 and older can increase these amounts by $1,000). Contributions are deductible even if the return is not itemized and any interest earned is tax-free.
  • Charitable Donations Deduction: If the return is itemized, charitable donations like monetary gifts, the value of materials or food donations, and out-of-pocket expenses incurred while volunteering are deductible. Filers should have documentation to back up their claims.

Dobbs says the bottom line during tax time is to increase tax refunds on both state and federal returns.

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