This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

5 New Tax Breaks (and 4 You May Be Forgetting)

NEW YORK ( TheStreet) -- The tug of war over what credits and deductions the U.S. government allows and what taxpayers take is a grim and calculated struggle, and one that repeats itself every year.

Taxpayers lose leverage by not paying close attention to the tax breaks scattered through the U.S. tax code -- which clocked in at more than 73,000 pages last year, compared with only 400 pages almost exactly 100 years ago.

One advocate for taxpayers is looking to level the playing field, offering up some fresh tax deductions and some tried-and-true deductions that often go overlooked by Americans.

That advocate is Rebecca Pavese, a certified public accountant and director of the tax practice at Palisades Hudson Financial Group, a Scarsdale, N.Y., wealth management firm.

Pointing to recent changes from Congress, Pavese offers up these brand-new tax breaks for Americans (she defines these deductions as "created, extended or made permanent" by recent changes to the U.S. tax code by Congress):

  • Student-loan interest. Voluntary interest payments are now deductible. You can deduct the full amount, up to $2,500 yearly (subject to income phase-out limitations), even if you paid more than required, Pavese says. In addition, you can now deduct interest as long as you have the loan, not just for the first 60 months, as was the case. The new law makes that change permanent.
  • Cancellation of mortgage debt on a principal residence. If a lender forgave you mortgage debt through 2013, you don't have to report that amount as income. That's a big relief to homeowners who got a price break via home loan modifications.
  • Donating land for conservation. Pavese says taxpayers who donated capital-gain real property for conservation purposes in 2012 can deduct the contribution up to 50% of their adjusted gross income. The old limit was 30%.
  • Private mortgage insurance premiums. PMI premiums are now treated just like qualified residential mortgage interest and are deductible. "This deduction is commonly missed because PMI premiums have only recently been deductible," Pavese says. The law made the old temporary rule permanent.
  • Child tax credit. The new law permanently extends the credit. You can get a $1,000 credit for each dependent child under 17. The catch: The credit starts to phase out for married couples with $110,000 of modified adjusted gross income, or $75,000 for single taxpayers. The credit is reduced by $50 for each $1,000 of income above the threshold amount.

Pavese offers some overlooked deductions many taxpayers miss. She includes:

  • Moving expenses. Look into deducting qualified moving expenses if you moved because of a change in your job location or because you started a job.
  • Adoption expenses. Money spent pursuing an adoption may be deductible too. In 2012, the tax credit maxes out at $12,650 per child.
  • Residential energy credits. You can save on taxes through installing energy-saving windows, doors, insulation and solar panels.
  • Don't give up on IRA contributions. Pavese says some IRA contributions can be made after April 15. If you're eligible, you can make deductible contributions to a standard IRA until April 15. But you can contribute to a Simple IRA, SEP IRA or Keogh plan up until you file your return. If you apply for an automatic extension, you can file as late as Oct. 15.

Taking what's available to you is fair play for taxpayers. Putting Pavese's tips to good use should keep Uncle Sam from taking what's rightfully yours this tax season.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
TSLA $206.79 0.00%
YHOO $44.45 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs