Tax Me, Tax Me Not: Little-Known Exemptions - Best Stock Market ...

Doing income taxes returns is something everyone does. Some people will use an accounting professional while other taxpayers will use software designed to do taxes for them. Of course there is always the method of writing out your tax return on the appropriate government provided form. The way is not nearly as important as being aware of what kind of tax deductions you are legally able to take advantage of to save your hard earned dollars.

Taxpayers are very aggressive about claiming exemptions on their returns, which totaled $842 billion in 2005 according to the IRS. That said, many taxpayers don?t claim all the exemptions to which they are legally entitled.

Get SmartIt may be possible, if your income falls within certain stated guidelines, to use education-related expenses as a credit against your tax liability. Available options include the Lifetime Learning credit, which permits you to receive a tax credit for the amount of your tuition, and the Hope credit. You can make your education more affordable if you?ll devote some study time to possible tax alternatives.

Considering the amount of people who were qualified for the Hope or Lifetime Learning subsidy as much as 25% did not take the benefit of it; based on a Government report that came out in 2005 which consisted of information from approximately 1.4 million tax returns. On a separate basis this was just about $160 for each person, but several of those exact people paid an estimate of $500 in extra taxes.

The Hope credit can get your college tuition partially paid for, depending on your income. As much as $1,650 for tuition or expenses related to tuition. This tax credit will not allow books, supplies or housing. The Lifetime Learning, as long as your college is approved, as much as $2000 towards expenses related to getting your schooling. Both of these programs are income-dependent. If you make too much money you will not be eligible at all, but the numbers are generous and based on your adjusted, modified gross income. For taxpayers who earn in excess of $47,000, for married-filing-jointly that figure would $94,000; making you still eligible but not for the full amount. You will be deemed completely ineligible if you earn $57,000 MAGI, and of course this number doubles for a married-filing-jointly household.

Deductions for tuition and education can be worth up to $4,000. It is not necessary to itemize these deductions. Single taxpayers earning less than $65,000 are eligible for the maximum deduction (the income limit is $130,000 for married taxpayers filing jointly). Taxpayers earning more than $65,000 but less than $80,000 can claim up to $2000 in tax deductions (again, the limit is twice as much for joint filings). If your income exceeds $80,000 this deduction is not available to you.

Nothing is simple when it comes to credits and deductions and this is no exception to the standard rule. You may not take advantage of the credit and the tuition deductions together. It will be worth your time to check which will be more, but credits are generally and often worth more than deductions. Be sure and check because there are options like, phase-outs that can affect you.

Ron Finkelstein is
NOT a tax attorney or an accountant. He is
merely a small business owner who has
paid a lot of money over the years to learn tax tips like the difference between tax evasion and avoidance and the Top 5 overlooked exemptions

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