Taking advantage of tax credits and deductions can help reduce what you owe to Uncle Sam and keep more money in your pocket. Deductions reduce your total amount of taxable income while tax credits lower your overall tax bill. Whether you file your own taxes or pay an accountant to do it, make sure you're taking advantage of as many tax breaks as possible to minimize your tax liability.
Paying higher education expenses may qualify you for a tax break. According to H&R Block, nearly 4.1 million people fail to take advantage of education tax credits and deductions each year. Available tax credits for the cost of tuition and fees include the American Opportunity Credit, the Hope Credit and the Lifetime Learning Credit. At the time of publication, you could also claim a $2,500 deduction for interest paid on student loans.
If you don't claim charitable contributions on your taxes, you're potentially missing out on a significant tax savings. Whether you donate cash, goods, services or your time as a volunteer, you can claim charitable contributions as a deduction as long as they are properly documented. For example, if you donate your time at a homeless shelter, you can deduct your mileage plus other out-of-pocket expenses associated with volunteer activities.
If you move, you can potentially deduct some of your expenses if the move is job-related. To qualify for the deduction, you must be employed full time for at least 39 weeks during the 12 months following the move. Your employer must not reimburse you for any of your moving costs and the new job must be at least 50 miles or more from your old address.
Tackling a home improvement project can also put more money in your pocket at tax time. Through 2016, the IRS offers a tax credit to homeowners who install alternative energy systems in their home. You can claim the credit for up to 30 percent of the cost of installing a solar panel system, geothermal heating system or wind energy system. Credits are also available for homeowners who use green building materials, including insulation, roofing and flooring.
Tax deductions are also available if you're self-employed or work from home. If you use your home primarily for business, you can potentially deduct portions of your rent or mortgage, utility costs, property taxes, insurance and repairs. Deductions are available for business equipment, including computers, printers and fax machines. You can also deduct up to half of your self-employment tax.
If you pay out-of-pocket health care premiums or other medical expenses, the IRS allows you to deduct some of these costs. To qualify, your expenses must be at least 7.5 percent of your adjusted gross income. You must itemize all of your deductions to claim a deduction for medical expenses.
Rebecca Lake is a freelance writer and virtual assistant living in the southeast. She has been writing professionally since 2009 for various websites. Lake received her master's degree in criminal justice from Charleston Southern University.