Deduction or Credit

In the world of taxes, a credit is better than a deduction. A credit reduces your taxes dollar for dollar (a $1,000 credit cuts taxes by $1,000). A deduction reduces your taxes by your tax rate percentage (a $1,000 deduction for someone in the 28% tax bracket cuts taxes by $280).

Under today’s complex tax rules, many deductions and credits disappear once your income reaches certain levels. By knowing what tax deductions and credits you might qualify for, you may be able to do tax planning that will preserve your eligibility for these income-sensitive tax breaks.

Here’s a quick checklist of some of the available credits and deductions. Check those that might apply to you; then find out if you need to do some year-end planning to benefit from them.

 Deduction for contributions to a health savings account.

 Saver’s tax credit of up to $2,000 for retirement plan contributions.

 Business tax credit for providing child care facilities for employees.

 Energy credits for home-builders and appliance manufacturers.

 Deduction for energy-saving improvements made to commercial buildings.

 Credit for energy-saving home improvements.

 Expensing deduction up to $133,000 for the purchase of business equipment.

 Credit of up to $12,150 for expense of adopting a child.

 Credit for child care expenses.

 Deduction for job-related moving expenses.

 Earned income credit for low-income workers.

 Deduction for job-hunting expenses.

 Deduction for student loan interest.

 Hope or lifetime learning credits for education expenses.

 Deduction for home office expenses.

 Deduction for disaster losses not reimbursed by insurance.

 Deduction for home mortgage points.

Credits and deductions change frequently with revisions of the tax laws, and most of them have qualification requirements or income limitations. With regular tax planning, especially as year-end approaches, you’ll be able to benefit from more of these tax breaks. For help in identifying all the credits and deductions that could reduce your 2009 taxes, call us soon.

The information contained on this site should in no way be considered to be professional advice in the form of either tax, accounting, or legal service or consultation. You should always consult with a professional familiar with your individual circumstances before making any specific decisions related to accounting, tax, or legal matters.