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Tax Considerations Not to Miss As Deadline Nears
Parsippany, NJ (Profitable.com) Jackson Hewitt Tax Service®, the nation’s second largest tax preparation firm, reminds taxpayers of commonly overlooked tax credits that can increase a refund or reduce taxes owed. Given the complexity of the U.S. tax code, the average consumer is simply not aware of all the tax considerations that may apply to their particular situation.
“Many U.S. taxpayers leave valuable tax refund dollars on the table each year by failing to claim all of the credits available to them on their annual income tax returns,” said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. “Working with a tax preparer who is up-to-date on the tax code can help identify all of the applicable credits, such as those related to dependents, education and retirement fund contributions.”
Like tax deductions, credits serve to reduce the amount of tax an individual pays. Unlike tax deductions, which are a reduction in the amount of a taxpayer’s income that is subject to tax, credits serve to allow a direct reduction of the tax due, lowering an individual’s tax burden dollar for dollar.
When filing a 2011 tax return, Steber advises taxpayers to pay close attention to these five commonly overlooked credits:
1. Earned Income Tax Credit – This credit provides eligible individuals and families with low to moderate earned income with up to a $5,751 refundable credit for those who qualify. The credit is available for taxpayers with or without children and is based on income earned from wages, tips, salary and self-employment;
2. Child and Dependent Care Credit – Taxpayers who worked and had dependent care expenses for a dependent child under age 13, or for a dependent or disabled spouse, may be able to claim a credit for these expenses. This nonrefundable credit is calculated based on dependent care expenses and income. It can reach a maximum of $1,050 for the expenses for one qualifying child, or $2,100 for more than one child;
3. American Opportunity Tax Credit – Parents who are paying a child’s qualified tuition and related higher education expenses may be able to take advantage of the American Opportunity Tax Credit, which requires the student to be enrolled at least half-time in one of the first four years of post-secondary education. If the student does not meet the requirements for the American Opportunity Credit, taxpayers may be able to claim the Lifetime Learning Credit. However, taxpayers cannot claim both a Lifetime Learning Credit and the American Opportunity Tax Credit for the same student in the same year;
4. Residential energy efficient property credits – To qualify for the credits, the home must be the taxpayer’s principal residence, located in the U.S., and the property or improvements must have a reasonable life expectancy of at least five years. These credits are available on the installation of solar water heating systems, solar energy production systems and qualified fuel cell power plants, among other energy efficiency improvements; and,
5. Retirement savings contributions – Taxpayers who contribute to an IRA or an employer-provided retirement account, such as a 401(k), may be eligible for a credit based on up to $2,000 of their contribution for the year. This is in addition to any deduction or exclusion from income for the contribution.
About Jackson Hewitt Tax Service Inc.
Based in Parsippany, NJ, Jackson Hewitt Tax Service Inc. is an industry-leading provider of full service individual federal and state income tax preparation, with nearly 6,500 franchised and company-owned locations throughout the United States, including 2,800 located in Walmart stores nationwide. Jackson Hewitt Tax Service® also offers an online tax preparation product at www.jacksonhewittonline.com. For more information, or to locate your neighborhood Jackson Hewitt® office, visit www.jacksonhewitt.com or call 1-800-234-1040. Jackson Hewitt can also be found on Facebook and Twitter.