In the previous posts in this tax series, I discussed some tax basics and also the basic tax formula. Now, I will list some common tax credits and deductions that you don’t want to miss out on.

Tax Deductions whether you take the standard deduction or you itemize:

1. Business expense deductions – Do you run your own business? Are you an independent contractor? Do you have a home office? If so, you should be making deductions for your business expenses, which are considered above the line deductions.
2. Retirement contributions – Traditional IRA, 401k, etc
3. Student loan interest – up to $2,500/year on qualified student loans
4. Capital losses – losses on investments can offset any capital gains that you had or up to $3,000 in income

Tax Credits:

1. Education Tax Credits – There are two tax credits for education. The Hope Credit is only for those who are in their first two years of post-secondary education. The Lifetime Learning Credit is for anyone who is in school full-time. Details
2. Retirement Savings Contribution Credit – If you make eligible contributions to a qualified retirement plan (401k, IRA) you could qualify for up to a $1000 ($2000 for married filing jointly) tax credit if you fall into a certain income threshold. Details
3. Child Tax Credit – Depending on your AGI and if you take care of a child under the age of 13, you could take a tax deduction for a percentage of your work-related expenses. Details
4. First Time Homebuyer Credit – In the past, this was a tax credit that you would have to pay back eventually. In essence, it was a tax free loan. However, through November of 2009, if you purchase a home for the first time, you can get $8000 in a tax credit and would not have to pay it back.

These are just a few of the deductions and tax credits I could think of off the top of my head. There are plenty more that are available to you. If you would like me to post about those, please comment and let me know that you want me to write about those. Stay tuned for the next post in this series.