10 overlooked tax breaks
8. Retirement tax savings
The retirement savings contribution credit was created to give moderate- and low-income taxpayers an incentive to save. When you contribute to a retirement account, either an individual retirement account (traditional or Roth) or a workplace plan, you can get a tax savings for up to 50 percent of the first $2,000 you put into such accounts. This means you get a $1,000 tax credit, which is a tax break that directly reduces dollar for dollar any tax you owe.
9. Educational expenses
The Internal Revenue Code offers many tax-saving options for individuals who want to further their education. The tuition and fees deduction can help you take up to $4,000 off your taxable income and is available without having to itemize.
The lifetime learning credit could provide some students (or their parents) up to a $2,000 credit.
Don't forget the American opportunity tax credit, which offers a dollar-for-dollar tax break of up to $2,500. This education tax break was created as part of the 2009 stimulus package as a short-term replacement for the Hope tax credit, and was extended through tax year 2017 as part of the American Taxpayer Relief Act of 2012, also known as the "fiscal cliff" tax bill.
10. Energy-efficient home improvements
Tax breaks for some relatively easy energy-efficient home improvements expired at the end of 2013 and might not be renewed. That makes it all the more important to take advantage of the Nonbusiness Energy Property Credit, worth up to $500, when you file your 2013 tax return.
To claim this credit, found on part 2 of Form 5695, you must pay attention to specific spending limits, such as $150 for high-efficiency furnaces and boilers, $300 for air conditioners and heat pumps and $200 for replacement windows. These home upgrades must have been installed at your main residence by Dec. 31, 2013. Note also that the overall $500 tax credit cap applies to anyone who received any previous energy tax credit since Jan. 1, 2005.
Yes, this tax break does require recordkeeping and filling out some worksheets. But if you qualify, it is a tax credit, giving you a dollar-for-dollar reduction of your tax bill. And when it comes to taxes, every dollar saved helps.