Some tax breaks are regularly overlooked by people when they fill out their returns. If you fall into any of the categories below, you may be eligible for one.
You're married:
*Filing separately can save you money. Most of the time, of course, it doesn't. But if you itemize your deductions and you had big unreimbursed health care bills last year--for example, for psychotherapy, which is rarely fully covered by insurance--you might come out ahead by filing separately. You can deduct only medical bills that exceed 7.5 percent of your adjusted gross income, and you may have trouble meeting that figure when your and your husband's incomes are combined. If you list your medical expenses on an individual return (married, filing separately), you may be able to take the deduction. Remember, however, that if the two of you have children and want to take the child care credit, you must file a joint return.
*You can prevent the IRS from refusing your refund because of your spouse's bad financial history. Let's say you and your husband file a joint return and claim a refund. If he is behind on child-support payments or on repayment of his college loans, the IRS may refuse to send the refund even though most or all of it was due to overwithholding on your paychecks, your deductions and credits. But there is a loophole. Under a special provision of the law designed for "injured spouses," you can file Form 1040X, showing what part of the refund belongs to you, and the IRS will send you this portion.
You're a mother:
*You may be eligible for the child care credit even if you aren't working outside the home. This credit, which can reduce the taxes you pay, can be claimed by many "nonworking" mothers. For instance, you can take the credit if you pay someone to care for your child while you are job hunting. And if one spouse works, child care expenses incurred while the other spouse is in school full-time are covered. You can include not only the money you spend on day care and sitters but also the cost of summer day camp. The social security and unemployment taxes you pay on your sitter's wages are eligible too.
*The IRS may owe you money.
If you have a child who lived with you in 1990, and you earned under $20,264, you may be able to collect an "earned income credit" of as much as $953. When you fill out your tax return, you subtract your credit from the taxes you would otherwise owe. If your credit turns out to be more than you owe, you get back a check for the difference from the IRS. For more details, call 1-800-829-1040 or visit a local IRS office.
You're divorced:
*Maybe you're not "single" in the eyes of IRS. There's another tax category besides "married" and "single": "head of household." Since its tax rates are lower than those for "single," check to see if you qualify. You may if your child lives with you for more than half the year--even if her father claims her as a dependent on his return.
*You can get a tax break for costs related to your divorce. Legal fees for a divorce are rarely deductible, but fees for tax advice for a divorce are, and so is money you pay a lawyer to collect past-due alimony. Get a separate bill from your lawyer for these fees.
You're married:
*Filing separately can save you money. Most of the time, of course, it doesn't. But if you itemize your deductions and you had big unreimbursed health care bills last year--for example, for psychotherapy, which is rarely fully covered by insurance--you might come out ahead by filing separately. You can deduct only medical bills that exceed 7.5 percent of your adjusted gross income, and you may have trouble meeting that figure when your and your husband's incomes are combined. If you list your medical expenses on an individual return (married, filing separately), you may be able to take the deduction. Remember, however, that if the two of you have children and want to take the child care credit, you must file a joint return.
*You can prevent the IRS from refusing your refund because of your spouse's bad financial history. Let's say you and your husband file a joint return and claim a refund. If he is behind on child-support payments or on repayment of his college loans, the IRS may refuse to send the refund even though most or all of it was due to overwithholding on your paychecks, your deductions and credits. But there is a loophole. Under a special provision of the law designed for "injured spouses," you can file Form 1040X, showing what part of the refund belongs to you, and the IRS will send you this portion.
You're a mother:
*You may be eligible for the child care credit even if you aren't working outside the home. This credit, which can reduce the taxes you pay, can be claimed by many "nonworking" mothers. For instance, you can take the credit if you pay someone to care for your child while you are job hunting. And if one spouse works, child care expenses incurred while the other spouse is in school full-time are covered. You can include not only the money you spend on day care and sitters but also the cost of summer day camp. The social security and unemployment taxes you pay on your sitter's wages are eligible too.
*The IRS may owe you money.
If you have a child who lived with you in 1990, and you earned under $20,264, you may be able to collect an "earned income credit" of as much as $953. When you fill out your tax return, you subtract your credit from the taxes you would otherwise owe. If your credit turns out to be more than you owe, you get back a check for the difference from the IRS. For more details, call 1-800-829-1040 or visit a local IRS office.
You're divorced:
*Maybe you're not "single" in the eyes of IRS. There's another tax category besides "married" and "single": "head of household." Since its tax rates are lower than those for "single," check to see if you qualify. You may if your child lives with you for more than half the year--even if her father claims her as a dependent on his return.
*You can get a tax break for costs related to your divorce. Legal fees for a divorce are rarely deductible, but fees for tax advice for a divorce are, and so is money you pay a lawyer to collect past-due alimony. Get a separate bill from your lawyer for these fees.
