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Six Tax Breaks To Look For This Season

For most of us, tax season is anything but a good time. That said, you may just find some fun in unearthing some hidden tax breaks that you’ve been missing out on! And it’s a good year for it: the American Recovery & Reinvestment Act (ARRA) of 2009 created several completely new tax credits and deductions.

Here are six tax adjustments that could save you big bucks this year:

If you contributed to a retirement plan…

Certain taxpayers may qualify for a retirement saving credit to reduce their tax liability if they contribute to a traditional IRA, Roth IRA, or other retirement plan. This credit is very limited, however, and only those with a low enough Adjusted Gross Income (AGI) will qualify. Married couples that file jointly must have an AGI below $55,550 and single taxpayers must have an AGI below $27,750. If you qualify, the maximum credit would be $1,000 for singles and $2,000 for married couples. This credit is only available for those people who are over 18, not a dependent of someone else, and not a full time student.

If you bought a home…

By now, most of us are familiar with the newly popular home buyer tax credit created in 2008. Don’t count yourself out if you’re not technically a first-time home buyer: the credit only requires that you haven’t owned a residence during the previous three years. It’s important to note that the credit isn’t a flat $8,000, rather 10 percent of the purchase price, up to $8,000. Most residences cost well over $80,000, but some condos or lofts with lower price tags might qualify for less than the $8,000 ceiling. The credit is 100 percent refundable (which means the credit could reduce your tax liability below zero and result in a refund). But beware: If you sell your residence within 36 months, be prepared to pay the credit back to the IRS.

If you bought a new car…

In addition to the first-time home buyer credit, another perk of the (ARRA) is the new motor vehicle deduction. One of the biggest advantages of this deduction is that you do not have to itemize deductions to claim it. Most twenty-somethings aren’t able to itemize before they purchase a house, so this is definitely something to jump on if you bought a new car this year. The purchase must have been made after February 16, 2009 and income limitations apply ($135,000 max for singles, $260,000 max for married couples).

If you work at a school…

If you’re a teacher or hold another position at an elementary or secondary school (principal, aide, counselor, etc.), you can deduct up to $250 of your educational expenses from your income. You do not have to itemize to claim this educator expense deduction. To claim it, you must work at least 900 hours during the year at the school. Qualified expenses vary; gym teachers, for example, can deduct expenses for athletic equipment.

If you moved for your job or business…

If you had to pack up and move sometime during 2009 for a new job or to start your own business, you can deduct certain unreimbursed moving expenses from your income. You do not have to itemize for this deduction. The two biggest rules are: your new gig must be at least 50 miles further from your old residence than your old job was, and you must stay employed at the new job for at least 39 weeks of your first working year (78 weeks of the next two years for self-employed individuals). Be sure to keep track of expenses like transportation of household items (including cars and pets) and travel and lodging while moving to the new residence. Just don’t expect to write off meals at fancy restaurants along the way; meals aren’t deductible.

If you attended training required by your job…

If you had to attend mandatory training for your job this year, you can deduct most expenses related to the training. To be able to claim the deduction, the purpose of the training or class must be to maintain or improve current job skills. You cannot write off training or classes to qualify for a new position. Supplies, books, and travel to the classes are all deductible expenses. You must itemize to claim this deduction, so this excludes all taxpayers who take the standard deduction.

Finally…

Come tax season, be sure to examine your tax forms closely. If you use a tax preparer, don’t be afraid to ask how well he or she researched your particular situation. There could be many deductions or credits that you qualify for that you don’t even know about. Tax season is a time to use the current recession to your benefit—take advantage of all the tax breaks you can get!

About Amber Gilstrap

Amber is a twenty-something CPA from Kansas City, Missouri who loves writing, working out, and---of course---finding fresh ideas for saving money. Follow her on twitter @ambergilstrap.