Hidden Tax Breaks

In recent years, the average tax refund has been about $3,000. If you effectively determine and utilize the available tax credits, you may land a sizeable check this spring. Here are several commonly overlooked deductions worth a look.

Home office deduction 
Home offices have many perks: no commutes, casual dress code, etc. Add a tax break to the list of benefits. If you spend the majority of your time conducting business from home, you might be able to deduct some costs using IRS Form 8829. 

Renewable energy tax credit
Have you installed a renewable energy device, such as a solar water-heating system? If so, you might be able to deduct up to 30% of the cost. Form 5695 helps you determine the credit amount, if you qualify. 

Child adoption costs
Expenses related to adopting a child may be written off for 2014. That includes court costs, lawyer fees and traveling expenses such as lodging and meals. The maximum deduction is $13,190 for those who qualify. Refer to Form 8839 for more information.

Job-hunting costs
Travel expenses, fees paid to employment agencies and the cost of printing and mailing your resume can be claimed as miscellaneous itemized deductions on your tax return. Just be aware that you will only qualify for these tax breaks if you were looking for employment within your previous line of work. 

Relocation expenses
Some job relocation costs may be written off from your tax bill with the help of Form 3903. However, the IRS stipulates that your new workplace must be “at least 50 miles farther from your old home than your old job location was from your old home” to qualify. 

Child and dependent care credit
Costs to care for parents is listed as dependents and child day care expenses might qualify for the child and dependent care tax credit. Refer to Form 2441, which stipulates you and your spouse have to file a joint return and both must either have been employed or “actively looking for work” to qualify.

Earned-income credit 
Taxable earnings under a certain dollar amount in 2014 might qualify for the earned income credit. The limit is determined by the number of children, along with your tax filing status. If you are not married, have three or more children and earned less than $46,997, you may qualify. If you are married and have three or more children, the limit jumps to $52,427. For singles with no kids, the limit is $14,590.

Keep in mind that a direct deposit refund helps speed up its delivery. All you need is a checking or savings account at a financial institution such as AltaOne Federal Credit Union.  

We encourage you to take advantage of all available credits and deductions. A large tax refund can go a long way toward helping you to pay down debt and to set up emergency and savings funds. 

Tony Armstrong, NerdWallet

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