BOSTON ( TheStreet) -- Last year held many tax breaks and credits intended to get consumers spending. Federal stimulus money meant an $8,000 credit for homebuyers and breaks for buying hybrid vehicles and fuel-efficient cars and appliances.That was then. Following the end-of-year passage of the Tax Relief Act, many of those stimulus-related perks have disappeared. Nevertheless, there are some moves, purchases and life events taxpayers can count on for tax benefits and incentives throughout 2011. There are also some items where the tax incentive -- or lack thereof -- is a mixed bag.
|Whether you're buying a house, getting married, raising a family or approaching any number of other life-changing moments, it's worth it to figure out the possible tax benefits.|
No one should necessarily walk down the aisle or start a family based solely on IRS guidelines. But tax incentives may help thaw cold feet. The American Recovery and Reinvestment Act of 2009 created a category of families with three or more children and increased the maximum benefit of the Earned Income Tax Credit for 2009 and 2010. The Tax Relief and Job Creation Act of 2010 extended these changes through 2012. The maximum credit for 2010 tax returns is $5,666 for workers with three or more qualifying children. Workers without qualifying children may be eligible for a smaller credit amount. The Recovery Act included an expansion of the EITC worth, on average, $600 in additional assistance to families with three or more children. The Child and Dependent Care Tax Credit provides a credit of between 20% and 35% or up to $3,000 ($6,000 for two or more children) of child care expenses for children under age 13 whose parents work or go to school.
There are a variety of tax credits, deductions and savings plans available to taxpayers to help with the expense of higher education. In many cases, adults returning to academia can benefit just as their children's college education does.
You may be able to deduct certain expenses you incur while looking for a job, even if you do not get one. Expenses may include travel, resume and outplacement agency fees. Moving costs for a job at least 50 miles away from your home may also be deductible. Even haircuts in advance of that big interview can be deducted. Decide to chuck the corporate grind and go on the road with your high school metal band? The IRS offers musicians the opportunity to claim your spandex and fishnets as work-related garb. 4. Buy or sell a home
Taxes may not help much if you want to buy a new home, but other economic forces may help -- at least a little. The bad news: The $8,000 homebuyer credit is off the table. The good news is that many predict that home prices are still going down. If historically low interest rates -- especially for 30-year mortgages -- start to show signs of inching upward, there may be an uptick in transactions. That's good news for buyers, not so much for sellers.
"We had an extension of the Home Improvement Energy credit, but it is not last year's credit," Perlman says. "We are seeing some misinformation about that. What the tax relief act did was revive the old 2006-07 credit, but it is limited to $500 and is now a lifetime credit, as opposed to the big $1,500 credit." Do your homework
It is important for taxpayers to help themselves by telling tax professionals of life changes or important pending events. "The biggest mistake I see, and unfortunately I see it quite a bit, is the missed tax benefit, the omitted tax deduction, the overlooked credit and the overlooked deduction," says Mark Steber, chief tax officer for Jackson Hewitt Tax Service ( JTX). "Unfortunately the system is not one that self-protects taxpayers from leaving stuff off their return. By and large you are responsible for the identification of all of your deductions and benefits. If you leave a W-2 or 1099 form off, or miss some income, the IRS and the regulatory authorities are very good at finding that. They are not so good, not so focused and not so motivated to go find your earned income tax credit, your child tax credit, your child dependent care credit or anything you might have left off, including some deductions available if you are an artist, a tree grower, a farmer or policeman." Though software and preparers alike will make an effort to catch deductions, the onus falls on the taxpayer. "You have to take responsibility for the life changes that you had this year and tell your preparer that," Steber says. "You have to find out if a tax law might be applicable. It is just a smarter safer way to go." -- Written by Joe Mont in Boston. >To contact the writer of this article, click here: Joe Mont. >To follow the writer on Twitter, go to http://twitter.com/josephmont. >To submit a news tip, send an email to: firstname.lastname@example.org.