6 Overlooked Tax Breaks
about which credits and deductions you can claim on your 2012
tax return? You're not alone.
Even in an ordinary tax year,
it's hard to remember which tax breaks you can take, but the
fiscal cliff fiasco this year made it even more difficult to
keep everything straight.
With that in mind here are six tax
breaks for 2012 that you won't want to overlook.
State Sales and Income Taxes
Thanks to the fiscal cliff deal, the sales tax deduction,
which expired at the end of 2011, was reinstated retroactive
to 2012 (it expires at the end of 2013). As such, IRS allows
for a deduction of either state income tax paid or state sales
tax paid, whichever is greater.
If you bought a big ticket item like a car or boat in 2012, it
might be more advantageous to deduct the sales tax, but don't
forget to figure any state income taxes withheld from your
paycheck just in case. If you're self-employed you can include
the state income paid from your estimated payments. In
addition, if you owed taxes when filing your 2011 tax return
in 2012, you can include the amount when you itemize your
state taxes this year on your 2012 return.
Child and Dependent Care Tax Credit
Most parents realize that there is a tax credit for daycare
when their child is young, but they might not realize that
once a child starts school, the same credit can be used for
before and after school care, as well as day camps during
school vacations. This child and dependent care tax credit can
also be taken by anyone who pays a home health aide to care
for a spouse or other dependent. The credit is worth a maximum
of $1,050 or 35% of $3,000 of eligible expenses per dependent.
Job Search Expenses
Job search expenses are 100% deductible, whether you are
gainfully employed or not currently working--as long as you
are looking for a position in your current profession.
Expenses include fees paid to join professional organizations,
as well as employment placement agencies that you used during
your job search. Travel to interviews is also deductible (as
long as it was not paid by your prospective employer) as is
paper, envelopes, and costs associated with resumes or
portfolios. The catch is that you can only deduct expenses
greater than 2% of your adjusted gross income (AGI).
Student Loan Interest Paid by Parents
Typically, a taxpayer is only able to deduct interest on
mortgages and student loans if he or she is liable for the
debt; however, if a parent pays back their child's student
loans the money is treated by the IRS as if the child paid it.
As long as the child is not claimed as a dependent, he or she
can deduct up to $2,500 in student loan interest paid by the
parent. The deduction can be claimed even if the child does
Most people know that medical expenses are deductible as long
as they are more than 7.5% of AGI for tax year 2012 (10% in
2013). What they often don't realize is what medical expenses
can be deducted such as medical miles (23 cents per mile)
driven to and from appointments and travel (airline fares or
hotel rooms) for out of town medical treatment.
Other deductible medical expenses that taxpayers might not be
aware of include: health insurance premiums, prescription
drugs, co-pays, and dental premiums and treatment. Long-term
care insurance (deductible dollar amounts vary depending on
age) is also deductible, as are prescription glasses and
contacts, counseling, therapy, hearing aids and batteries,
dentures, oxygen, walkers, and wheelchairs.
If you've loaned money to a friend, but were never repaid, you
may qualify for a non-business bad debt tax deduction of up to
$3,000 per year. To qualify however, the debt must be totally
worthless, in that there is no reasonable expectation of
Non-business bad debt is deducted as a short-term capital
loss, subject to the capital loss limitations. You may take
the deduction only in the year the debt becomes worthless. You
do not have to wait until a debt is due to determine whether
it is worthless. Any amount you are not able to deduct can be
carried forward to reduce future tax liability.
Are you getting all of the tax credits and deductions you are
entitled to? Maybe you are...but maybe you're not. Why take a
chance? Make an appointment with us today and we'll make sure
you get the tax breaks you deserve.
Financial Services at Sullivan & Company, CPAs
Grow leads our Financial Services Division and is here to
help you navigate your financial future. As an Investment
Advisor Representative, she is able to provide an
independent opinion on the investments you already own or
are considering buying.
We can structure a portfolio
based on your risk tolerance or we can help you decide how
to invest in your company 401(k) plan. We work with each
client to identify their concerns and to provide solutions
according to their situation.
is also experienced in company retirement plans. If you own
a business that does not have a plan; we can discuss your
options and set up a plan that fits your company.
If your business already has a
plan; we offer a free evaluation of the plan to ensure that
it is up to date and working well for you and your
Our goal is to provide personal, unbiased and independent
advice to help you make well-informed decisions about your
financial life and investments.
Contact Kathy Grow or Jordana Para to set up a free initial
consultation (301) 657-8080.
And as always if you have any questions about accounting or
investments and how they effect you or your business, please give
us a call at
(240) 316-3564. We
can help guide you in the right direction.
Remember you can call our offices if you have any
questions about these or any other accounting, tax,
financial planning or insurance related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA
President, Sullivan & Company