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Tax Deductions and Credits
Karen R. SmithUnion Bank, N.A. Vice President and Branch Manager Most people don’t enjoy paying taxes, and to avoid owing more than necessary, it is prudent to work with a CPA or licensed tax consultant familiar with tax laws and procedures. Every year, many taxpayers overpay their taxes by overlooking deductions they could have claimed and tax credits available to them. Tax deductions reduce how much you owe in taxes by decreasing your income, and moving you to a lower tax bracket. To take advantage of deductions, a tax payer must itemize their tax return.
Tax credits are figured after you determine your tax bracket, and how much you owe in taxes. A tax credit is a dollar-for-dollar reduction in the amount of tax you owe, and are available to taxpayers whether they itemize or not.Here are a few commonly overlooked tax deductions and credits: Deduct job-hunting costs If you were out of work and looking for a job in the same line of work in 2011, you can deduct job search expenses. Deductible job search costs include items like food, lodging and transportation if your search takes you away from home, employment agency fees, postage, printing costs for resumes and business cards, etc. However, job hunting expenses incurred while looking for your first job don't qualify. Out-of-pocket charitable expenses In addition to charitable gifts you made during the year, be sure to keep track of smaller expenses you may have incurred while doing work for a charity. For example, ingredients for a dish you prepare for a nonprofit’s bake sale or postage you buy for a fundraising mailing count as charitable contributions. Keep your receipts, and if your contributions total more than $250, you'll need documentation from the charity. If you drove your car for the charity in 2011, be sure to deduct 14 cents per mile plus parking and any tolls paid.Home-buyer creditThis credit expired in 2010 for most homeowners; however, if you are a member of the armed services on extended duty outside the United States for at least 90 days during the period after December 31, 2008, and ending before May 1, 2010, you may qualify for a tax credit up to $8,000.Energy-saving home improvements creditAlthough this credit has been scaled back, you still may be able to take advantage if you made energy-saving improvements to your home in 2011. The credit is worth 10 percent of the cost of qualifying energy savers including new windows and insulation. The maximum credit is $500 allowed on all tax returns from 2006 to 2011. There's also no dollar limit on the separate credit for homeowners who install qualified residential alternative energy equipment, such as solar hot water heaters or geothermal heat pumps. Your credit can be 30 percent of the total cost (including labor) of such systems installed through 2016. It is important to note that not everyone qualifies for certain tax deductions and credits. If you earned less than $49,000, you can get free face-to-face help on your tax return at IRS offices or from Volunteer Income Tax Assistance (VITA) programs, and if you're over 60, you can get help from the Tax Counseling for the Elderly program run by AARP. For more information, visit the IRS website at (www.irs.gov).The foregoing article is intended to provide general information about tax deductions and credits and is not considered financial or tax advice from Union Bank. Please consult your financial advisor.
Karen R. Smith is a vice president and branch manager of Union Bank’s Crenshaw branch. Union Bank, N.A., is a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies, and major corporations. The bank operated 414 branches in California, Washington, Oregon, Texas and New York, as well as two international offices, on December 31, 2011. UnionBanCal Corporation is a wholly-owned subsidiary of The Bank of Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJ Financial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJ Financial Group (MUFG, NYSE:MTU), one of the world’s largest financial organizations. Visit www.unionbank.com for more information.###