At some point, most of us graduate from the 1040EZ.
It usually happens in our 20s and 30s. Finances get more complex. We buy a home. Or, if we’re really lucky, our taxable income tops $100,000 — too high for the simplest of forms.
If you’re new to longer forms this tax season, welcome to a world of deductions and credits.
Among them:
If you’re still in college or graduate school, you may be eligible to deduct up to $4,000 in tuition and fees. Or, students may be eligible for a lifetime learning credit of up to $2,000.
Credits are generally better than deductions. “You figure your tax bill and lop off $2,000,” says Barbara Weltman, author of “1001 Deductions and Tax Breaks.”
Maybe you’re not a student but the teacher? Deduct up to $250 in classroom supplies you buy that are not reimbursed by the school.
percent of adjusted gross income.
Cell phone bills and Internet access used for work may also be deductible if not reimbursed by an employer, Weltman says. These, too, must meet the 2 percent threshold.
You may be able to deduct up to $4,000 contributed to a traditional individual retirement account if you meet income limits.
Low-income workers — couples with incomes of $50,000 and less and
singles earning half that — also may be eligible for a Savers Credit. It’s
worth up to half the amount you contribute to a 401(k) or an IRA, but no
more than $1,000. The credit essentially allows you to “double dip” because
you also get the IRA deduction and tax benefits of the 401(k), Weltman
says.
won’t be taxed in retirement. The Roth is ideal for younger investors who
have decades to see investments grow.
them. Go to www.baltimoresun.com/taxtalk.
Questions? Comments? Write personal.finance@baltsun.com.
