By the Numbers
According to Albert Einstein, the hardest thing in the world to understand isn’t relativity it’s income tax. And the genius has a point.
Consider these numbers as you report your earnings to Uncle Sam.
The amount you can claim with the energy efficiency tax credit.
Outfitting your home with eco-friendly items can save you a bundle. Homeowners interested in reducing their carbon footprint can count 10 percent (up to $500) of qualifying materials—think energy-saving doors, windows, insulation, heating and air conditioning systems, and roofing materials. Labor and installation costs are not included in the credit.
The percentage of adjusted gross income you must spend on medical costs to write them off.
You probably knew insurance premiums and co-pays can be written off, but many other costs associated with medical care qualify. Things like miles traveled, tolls, and parking are also deductible. Since these costs count when they are paid—not incurred—a little planning can go a long way. Get the most from this deduction by using a credit card so all fees are paid in the same calendar year.
The number of people who itemized their 2011 tax return.
When it comes to taxes, it’s not who you know but what you know that matters. Every year millions of taxpayers overpay because of missed deductions. Organizations like the IRS and H&R Block offer loads of resources for confused filers. So if you have questions about charitable donations or student-loan interest, don’t miss out on the deduction—ask an expert.
The amount per mile you can deduct during a job search in 2012.
Landing that dream job isn’t the only benefit of polishing your résumé. Many expenses associated with a job change are deductible if you were employed during your search. Items like résumé development fees and miles driven for interviews count as long as you look for a job in your current industry. If you relocate more than fifty miles, moving expenses also qualify. Just make sure all these expenses add up to more than 2 percent of your adjusted gross income.
The number of refund checks and letters returned to the IRS last year.
Thinking about moving? Whether you relocate around the corner or across the country, you need to pass on your new info to the IRS so your refund check doesn’t get lost in the mail. Notifying the post office to forward your mail may not be enough. To ensure your refund check makes it to your new home, fill out Form 8822 and mail it to the IRS. Don’t want to bother with forms? Another option is to write a letter including your full name, old and new addresses, and social security number. Don’t forget to sign it.
The year the Kiddie Tax was created.
Most children don’t have enough earned income to worry about paying taxes, but unearned income is a different story. The tax rate varies by the age of your child and the amount of interest, dividends, or capital gains paid out. Children under eighteen or twenty-three if a full-time student—pay no taxes on income under $950. The next $950 is taxed at the child’s tax rate. Anything over that is taxed at the parent’s rate.