Tax breaks

One of the reasons that figuring out your taxes may seem complicated is that there are many special provisions that provide tax relief to certain groups of people. For example, people over 65 and those who are blind can take larger personal exemptions.

Most of these benefits are available to people who earn less than a certain amount, but those restrictions aren’t the same from benefit to benefit.

Benefits to investigate

Since all taxpayers have the right to take all of the adjustments, deductions, and credits for which they qualify, you should make it your business to find out which ones you can use. Remember that adjustments reduce your gross income when you calculate your adjusted gross income (AGI), deductions are subtracted from your AGI to find your taxable income, and credits are subtracted from the tax you owe.

Some of the adjustments you might want to check out are those for:

• Student loan interest, if you are repaying a loan you used to pay tuition or other qualified higher education expenses

• Contributions to deductible IRAs

• Contributions to a health savings account (HSA)

Some of the credits that you may qualify for are:

• Education credits, including the Hope Credit for the first or second year of a degree or certificate program and the Lifetime Learning Credit for almost any education beyond high school

• Retirement savings account contributions

• Earned income credit

  

• Child tax credit if you have a qualifying child

• Childcare credit if you pay someone to take care of your child while you work or look for work

• Credit for purchasing qualifying energy efficient cars or installing energy-saving equipment and devices in your home