7. Many medical costs
Taxpayers who itemize deductions know how difficult it often is to reach the 7.5 percent of adjusted gross income threshold required before you can claim any medical expenses. It might be easier to clear that earnings hurdle if you don't overlook
miscellaneous medical costs.
 | | Miscellaneous medical costs | | | | • | Travel expenses to and from medical treatments at 20 cents per mile for 2007 taxes, 19 cents per mile in 2008. | | • | Insurance premiums you pay from already taxed income, including some long-term care insurance costs. | | • | Uninsured medical treatments, such as vision examinations and chiropractor treatments. | | • | Alcohol- or drug-abuse treatments. | | • | Medically necessary weight loss programs. | | • | Some household improvements if prescribed by a physician to treat a specific ailment. |
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Self-employed taxpayers who are not covered by any other employer-paid plan, for example, one carried by a spouse, can deduct 100 percent or health insurance premiums as an
above-the-line adjustment at the bottom of Page 1 of Form 1040.
8. Retirement tax savings
The
Retirement Savers Credit was created to give moderate- and low-income taxpayers an incentive to save for retirement. When you contribute to a retirement account, either an IRA (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 any tax you owe, as well as the $2,000 reduction in your income. Because it was designed to assist lower-income workers, this credit isn't available to all, but if you qualify, don't waste it.
9. Educational expenses
The Internal Revenue Code offers many tax-saving options for individuals who want to further their educations. "People generally think of these as applying to a person who has a child who is a full-time student," says Scharin. "But they also could be useful to someone of any age who's gone back to school or is taking a course at night."
In these cases, you have the option of the
tuition and fees above-the-line deduction, which will take up to $4,000 off your taxable income, or the
Lifetime Learning Credit, which could provide savings of 20 percent of tuition cost up to $10,000, or a $2,000 credit.
Don't be immediately swayed by the dollar amounts. A deduction of $4,000 is only worth a $1,000 tax cut to a filer in the 25 percent bracket. A $2,000 credit, meanwhile, means you get to subtract two grand from your tax bill, possibly zeroing out what you owe. So run the numbers for both to make sure you get the best tax advantage. 10. Energy efficient home improvements
Don't overlook the Residential Energy Tax Credit this filing season. It's the last chance you get to write off some home improvements that made your
house more energy efficient. The tax breaks range from $50 for the installation of a whole-house circulating fan to $2,000 for installing solar-powered systems. Some of the credit amounts are also limited by any work you claimed on your 2006 return. But if you didn't max out your credits in 2006 and made additional energy upgrades in 2007, be sure to claim them this year by filing
Form 5695.
Some of these tax breaks can save some filers a nice chunk of tax money. With others, the savings might be relatively small. But when it comes to taxes, every bit of savings helps. So make sure you don't overlook any of these possible tax breaks as you finish up your 2007 return. |