Taxes are always a matter of concern. At such times, it's good to know the pertinent laws, so that you can get the most benefit. Information is power! And in this case, it can help you enjoy some great tax benefits.
Here are 7 important laws that will help you.
1. Credit Card Fees Deduction. When and if you charge your income tax payment to a credit card, the IRS permits you to deduct the interest fees charged for that particular transaction. This should be entered as miscellaneous deduction in Schedule A, line 23.
2. Unemployment Benefits Relief. The sudden and devastating recession period has left many people without jobs, to depend upon unemployment compensation. Until now all such income was taxable. Now, the first $2,400 is not counted as taxable income.
3. Home Buyer Credit. The first-time home buyer credit has been extended up to April 2010, and the limit increased to $8,000/-. For the home owners who have lived in their house for the last five consecutive years, the limit is $6,500/- (the period from Nov 7, 2009 to April 30, 2010).
4. Education Tax Credit. While Hope Credit allowed for a $1,800 tax break, the new American Opportunity Credit allows the limit to be extended to $2,500 out of the first $4,000 spent on education. While the Hope Credit allowed for a two years claim, with the American Credit you can claim for the first four years post-secondary education. The great part about American Opportunity is that you can get a refund even if you do not owe the IRS. Take note that 40% of the credit is refundable; this translates in up to $1,000/- refund even if you owe no taxes.
5. Light Vehicle Tax Deduction. This is your chance to write off the sales taxes on a recently bought light vehicle; this includes a car, motor home, light truck and motorcycle. For standard deduction filers, look up Schedule L for this purpose, while for those who file itemized tax deductions, claim the deduction for sales tax on Schedule A. This tax break is applicable for any vehicle you have bought last year.
6. Energy Friendly Tax Break. Now you can spend more on making your home energy efficient and enjoy a credit of 30% on such upgrades, up to a maximum of $1,500/-. In this bracket, you can claim a break for any simple thing like installation of energy saving windows, insulation, energy efficient air conditioning, and the like. For more costly upgrades, such as geothermal system installation, solar panels, and other such complex installations, the tax break is 30% of the cost with no upper limit.
7. The Bicycle Commuter Act. A recent inclusion in the tax code section is the reimbursement of transportation cost by employers for cyclists. You can use the $20 that is earmarked for this purpose to meet costs pertaining to cycling – purchase a cycle, accessories such as helmet and other safety gear, fees for cycle parking and even maintenance costs of the cycle. These costs can be used for tax break.