For regular citizens, the fiscal cliff deal brings lots of changes to how our taxes will be calculated.
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Before tackling your tax return, brush up on this baker's dozen of deductions that could cut your tax bill.
You have until April 17, 2012, to contribute up to $5,000 to a traditional IRA for 2011 and deduct it on your tax return. Here are some guidelines.
If you work for yourself, you can open a Simplified Employee Pension IRA by April 17, 2012, and deduct your contribution on your 2011 return. SEP IRAs are an easy way to create your own retirement plan, and they can allow much higher contributions than traditional IRAs.
You can deduct interest paid on your primary mortgage as well as home equity loans and lines of credit. In general, you may deduct interest on up to $1 million of primary mortgage debt and up to $100,000 of home equity balances.
Feeling like every single government entity is after your money? Fortunately, the federal government cuts you a little slack, letting you deduct property and income taxes imposed by state and local governments.
If you paid little state income tax — or live in a state that doesn’t tax income at all — you can choose to deduct sales tax instead. And you don't need receipts — simply calculate an assumed amount using an IRS table or online calculator.
Donations to charity can ease your tax burden, but only if you have the right documentation. Cash contributions — regardless of the amount — require a cancelled check or dated receipt. Any contribution of $250 or more requires a written acknowledgement from the charity. Noncash contributions valued at more than $5,000 generally require an appraisal.
Some or all of interest on loans taken out to pay qualified higher education expenses is generally deductible if your adjusted gross income is less than $75,000 ($150,000 if you're married and file a joint return). Tuition and fees may be deductible if your adjusted gross income is $80,000 or less ($160,000 on a joint return). There are also two tax credits for college costs: the American Opportunity Credit and the Lifetime Learning Credit (See IRS Publication 970).
The government sets a high hurdle for these expenses: You can only deduct them if they exceed 7.5% of your adjusted gross income.
Self-employed taxpayers get a big break on one of their biggest financial headaches. In general, they can deduct all of their health insurance premiums.
If your family was covered by a high-deductible health insurance plan in 2011, you can contribute up to $6,150 to a health savings account ($3,050 if it only covered yourself). Contributions are deductible and withdrawals for qualified medical expenses are tax-free. Similar to IRAs, you have until April 17, 2012, to contribute for the 2011 tax year.
If you moved to take a new job, you can deduct your expenses if you pass these two IRS tests:
If you traveled more than 100 miles to attend a drill and spent the night, you can deduct your lodging expenses, half the cost of your meals, and 51 cents per mile for travel. You can also deduct tolls and parking fees.
Teachers, aides, counselors and principals — kindergarten through 12th grade — can deduct up to $250 for classroom supplies purchased in 2011.