More Tax Deduction Tips for Families
5: Moving Expenses if Moving for a Job
If you were out of work for any part of the year, family taxes might seem especially daunting. But if you had to move to find new work -- or simply relocated to take the dream job you always wanted -- you might consider deducting expenses from your move.
The great news for families is that the deductions cover every member of the household, not just the person with the new job. That means that if you can meet the requirements, you can deduct things like lodging and transportation for the whole family while your move takes place. (You can't write off meals, unfortunately.)
In order to get the deduction, you have to meet both a time and distance test. The time test says that you have to have 39 weeks of employment in the year after the move [source: Pulawski]. (This is so you can't just move, get a job for a hot second and then quit it to collect that sweet deduction.) The distance test says that your new house must be located at least 50 miles (80 kilometers) farther away than your old work location was to your old house. (So if your new job is 50 miles [80 kilometers] from your old house and only 10 miles [16 kilometers] from your new house, you're golden.) And if that new job means you have to hire someone to watch the kids while you're working? Read on to find out how you can save some child care tax money.
4: Child Care Tax Credit
Working parents deserve many, many credits. And while we all love being showered with praise, financial credits are loads more helpful than kind words. The Child and Dependent Care Tax Credit can be extremely valuable to any family that employs help to watch the kids.
Now we should be clear: You can't take the credit if you're hiring a nanny to watch Junior while you pursue your wood carving hobby. You must be hiring child care while you're either working or looking for work [source: IRS]. The credit itself is nothing to sneeze at; it's worth up to 35 percent of the costs of care, which, depending on your income, could be up to $3,000 (or $6,000 if more than one person is being cared for).
It's important to point out that this qualifies not just for your children, but also for other dependents as well -- or even for spouses who require care due to physical or mental disabilities. So if your mother requires some at-home help that you can't provide during working hours, you can claim the credit too.
3: Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a nifty little credit designed to help lower-income workers supplement their wages. It's a really great credit because it's refundable; that means that even if you haven't had taxes withheld, you still can get a refund.
The average EITC credit is $2,300, but the size of your credit is based on income, marital status and qualifying children [source: IRS]. If you have a qualifying child, there's no age limit to the credit -- but without one, you must be between 25 and 65.
The credit is available to you even if you lost a job or worked fewer hours over the course of the year: As long as your income is under a certain limit, you can qualify. If you're filing alone with no children, you must make less than $14,590 a year. The scale goes up if you file jointly and add qualifying children: The highest AGI that qualifies for the EITC is $52,427 -- if filing jointly and with three or more qualifying children [source: IRS].
2: Home Office
Many Americans -- we're talking more than 20 million here -- don't take home office deductions even if they have a home office [source: Eisenberg]. While that seems straight-up silly, consider that the IRS rules for home offices were -- in the not-so-distant past -- a little difficult to maneuver. There was also a long-standing rumor that putting a home office deduction on your return immediately put it right on top of the "audit me, please" pile at the IRS.
But if you're itemizing deductions and looking for ways to relieve your family of some tax burden, be assured those days are over. In fact, the IRS has made it even easier to claim a home office deduction by introducing the "simplified" method. Previously, taxpayers had to determine what percentage of all their actual expenses were "business-related" to arrive at a deduction for a home office. Now, the IRS offers the option of simply multiplying the square footage of your office or home workspace by $5 to arrive at your deduction amount.
Now, don't assume you can scam the system. You still have to meet the same stringent requirements for a home office -- it's just whole lot easier to claim if you do.
1: Tax Preparation
There are a couple ways that the act of doing your taxes might actually save you a bit of coin on your tax bill. The first way is pretty simple: Do them yourself, because nothing beats free.
But there are obviously times when it can be worth it to seek out a pro. Professionals have years of experience combing through all the available tax breaks -- and therefore might be worth the cost, especially if you're itemizing. You can actually write off the cost of a tax preparer, or even tax software, on your miscellaneous deductions. If you're paying to e-file your return, that's a deduction, too.
The only catch is that you can't write off the year of the taxes you're currently working on -- you can only claim the taxes you paid the year before. So, if you're filing your 2014 return, you can write off the expenses incurred to prepare and file your 2013 taxes.
While these deduction tips are proven winners, there's always more you can do. For more tax and deduction information, check out the next page.
Author's Note: 10 Tax Deduction Tips for Families
As if just getting dependent deductions isn't enough, there's one other sneaky way to make the kids work for you: Literally hire them to work for you. If you're self-employed or run your own business, you can hire your kids as employees -- and you don't have to withhold Social Security or federal unemployment tax if they're under a certain age. Already pay their phone bill? Consider it their wages, and you can write it off on your taxes.
- Eisenberg, Richard. "Secrets of Claiming a Home-Office Deduction." Forbes. Feb. 8, 2013. (Oct. 4, 2014) http://www.forbes.com/sites/nextavenue/2013/02/08/secrets-of-claiming-a-home-office-deduction/
- Hasson, Judi. "6 Tax Tips for Family Caregivers." AARP. Jan. 2014. (Oct. 4, 2014) http://www.aarp.org/home-family/caregiving/info-02-2013/6-tax-tips-for-family-caregivers.html
- IRS. "Charitable Contribution Deductions." Sept. 2, 2014. (Oct. 4, 2014) http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Charitable-Contribution-Deductions
- IRS. "Don't Overlook the Child and Dependent Care Tax Credit." March 20, 2014. (Oct. 4, 2014) http://www.irs.gov/uac/Newsroom/Dont-Overlook-the-Child-and-Dependent-Care-Tax-Credit
- IRS. "Earned Income Tax Credit; Do I Qualify?" Jan. 2014. (Oct. 4, 2014) http://www.irs.gov/uac/Newsroom/Earned-Income-Tax-Credit-Do-I-Qualify
- IRS. "Preview of 2014 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates." Dec. 30, 2013. (Oct. 4, 2014) http://www.irs.gov/Individuals/Preview-of-2012-EITC-Income-Limits,-Maximum-Credit--Amounts-and-Tax-Law-Updates
- IRS. "Publication 970." 2013. (Oct. 4, 2014) http://www.irs.gov/pub/irs-pdf/p970.pdf
- IRS. "Reduce Your Taxes with Miscellaneous Deductions." Aug. 5, 2013. (Oct. 4, 2014) http://www.irs.gov/uac/Newsroom/Reduce-Your-Taxes-with-Miscellaneous-Deductions
- Phillips Erb, Kelly. "IRS Announces 2014 Tax Brackets, Standard Deduction Amounts and More." Forbes. Oct. 31, 2013. (Oct. 4, 2014) http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/
- Pulawski, Shirley. "How to Qualify for Tax Deductible Moving Expenses." Lifehacker. March 6, 2014. (Oct. 4, 2014) http://lifehacker.com/how-to-qualify-for-tax-deductible-moving-expenses-1537689884
- TurboTax. "IRS Publications." Intuit. 2013. (Oct. 4, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/IRS-Publications/INF12063.html
- TurboTax. "Tax Exemptions and Deductions for Families." Intuit. 2013. (Oct. 4, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Family/Tax-Exemptions-and-Deductions-for-Families/INF12053.html
- TurboTax. "The 10 Most Overlooked Tax Deductions." Intuit. 2013. (Oct. 4, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/The-10-Most-Overlooked-Tax-Deductions/INF12062.html
- TurboTax. "Top 10 Tax Deductions You're Not Taking." Intuit. 2013. (Oct. 4, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/Top-10-Tax-Deductions-You-re-NOT-Taking/INF19564.html
- TurboTax. "What Is the EIC or EITC and Do I Qualify?" Oct. 16, 2014. (Nov. 2, 2014) https://ttlc.intuit.com/questions/1899157-what-is-the-eic-or-eitc-and-do-i-qualify
Many Americans don't think about their tax bills until the new year. But there are things you need to do before Dec. 31 if you want to pay less later.