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10 Revamped Tax Write Offs*

In these uncertain economic times, saving is more important than ever. But all too often, people who are trying to cut expenses end up overpaying on their taxes. In fact, as many as 2 million Americans shell out more money to Uncle Sam than they really owe every year.

The good news is, there are hundreds of deductions in the tax code, and familiarizing yourself with some of the major ones could have a big impact on your bottom line. Are you overlooking tax breaks that could save you money? Read on to learn more about these recently updated write offs.

  1. Job Hunter Deductions: If you're one of the many Americans who was seeking employment this past year, you may be able to write off some of your job search-related expenses. The cost of résumés, paper, postage, faxing, job-related phone calls, and employment agency fees can all be deducted. What's more, you can generally write off all travel to and from interviews, job fairs, and networking events. However, to claim these deductions, you must have searched for a position in the same field you previously worked in. If it's your first job search, or you are seeking employment in a new trade or business, you won't be eligible for these deductions but may be able to claim job-related relocation costs. If you have been unemployed for a year or more, one way around this general rule is to prove that you are actively job searching. Maintain careful records of your job hunting activities and keep up your memberships in professional organizations and clubs.
  2. American Opportunity Tax Credit: This is a new, refundable tax credit for higher education expenses for 2009 and 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher income levels and those who do not owe taxes. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years, instead of two. The maximum annual credit is up to $2,500 on the first $4,000 of qualifying educational expenses. To claim this credit on your tax return, include Form 8863, Education Credits, with your taxes.
  3. Tax Breaks for Teachers: For most teachers, the job doesn't end when the bell rings. Many U.S. educators, particularly those who work in under-funded schools, routinely pay out-of-pocket for classroom supplies, such as books, pencils, and computer equipment. For this reason, the IRS allows teachers to deduct up to $250 in classroom supplies each year. The deduction can be claimed directly on your 1040 form (so you don't have to itemize), and even if you're not technically a teacher, you may be eligible (teacher's aides, principals, and counselors generally qualify).
  4. Home Worker Write Offs: These days, more and more people are working from home, and some of them may be eligible for a home office deduction. To qualify, you must use the space regularly and exclusively for work (as opposed to using it as a hybrid office and home gym or guest room). In addition, you must either be self-employed or working at home at the request of your employer. If you meet these criteria, you can simply divide the square footage of your home office from the total square footage of your home, and calculate your expenses accordingly.
  5. Credits for Charity: When you give to charity, you're not only supporting a worthy cause, but you may also be able to get a tax break. To qualify, you have to donate cash or property (as opposed to pledges or services), and your contribution must be made to a tax-exempt organization (to check, ask them to verify their 501(c) (3) tax-exempt status). In addition, you must itemize your deductions, keep detailed records, and ask for a receipt from the organization showing its name, the date, the place of contribution and a description of the goods or money donated. Bear in mind that contributions to political campaigns, business associations, and individuals do not generally qualify.
  6. Military Travel Deductions: If you or a loved one is in the armed forces, at some point, you'll probably be required to travel. Fortunately, certain travel expenses are tax deductible. To qualify, you must be traveling away from your permanent duty station, and your expenses must be work-related. Such expenses might include airfare, train tickets, or gas, as well as business-related meals, lodging, taxis, phone calls, laundry, and dry cleaning while you are away from home. To find out more about tax deductions for military families, visit Military.com's Taxes Center.
  7. Incentives for Home Buyers: To encourage qualified borrowers and jumpstart the housing market, the government has authorized and extended several tax credits for home buyers. If you are a first time home buyer who has not owned a principal residence during the three year time period prior to purchase, you are eligible for a tax credit equal to 10% of the home's purchase price, up to $8,000. If you are a move-up buyer who has owned and lived in the same home for five consecutive years out of the last eight years, you are eligible for a tax credit equal to 10% of the home's purchase price, up to $6,500. To qualify, you must have purchased your home after 2008, be under contract by April 30, 2010, and close on the home by June 30, 2010.
  8. Breaks for Energy-Efficiency: In addition to protecting the planet, going green could earn you a tax deduction. Homeowners who purchase and install specific energy-efficient products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment can receive a tax credit for 30% of the cost, up to $1,500 for improvements, for purchases made between January 1, 2009, and December 31, 2010. Consumers who install solar energy systems, small wind systems, geothermal heat pumps, and residential fuel cell and microturbine systems can receive a 30% tax credit for systems place in service before December 31, 2016. What's more, individuals who buy or lease a new hybrid gas-electric car or truck are eligible for a credit of $250 to $3,400, depending on fuel economy and weight. To qualify, include an 8910 form with your taxes, along with the manufacturer's certification and receipts proving that you purchased an eligible vehicle.
  9. Credits for Child and Dependent Care: Individuals who paid for the care of their child or adult dependent this year may be able to reduce their taxes by claiming the child and dependent care credit on their return. To qualify, the care must have been provided for a dependent child age 12 or younger, or a dependent of any age that cannot care for him or herself. In addition, the care must have been provided so that the parent could go to work or look for a job, the child or dependent and the daycare provider both must meet certain qualifications, and the parent must have earned income. As with all deductions, be sure to keep careful records that verify your eligibility.
  10. Adoption Tax Credit: If you adopted a child and paid out-of-pocket expenses relating to the adoption, you are eligible to claim an adoption credit of up to $12,150. To be eligible, you must adopt an eligible child, and pay qualified adoption expenses out of your own pocket. To claim this credit, include Form 8839 Qualified Adoption Expenses with your taxes.

Once you've determined which deductions you may be eligible for, be sure to check the latest updates from the Internal Revenue Service. To learn more about what these deductions could mean to your bottom line, read our Tax Deductions Guide. And visit our Income Tax Center for more tips and expert advice.

In addition, remember that eligibility for all of these tax breaks is dependent upon meeting certain income requirements. Although you may be eligible for some breaks, there's a limit to what you can reasonably deduct. According to experts, attempting to claim excessive deductions could earn you an audit. To protect yourself, be sure to save all your receipts, and if you do get audited, don't panic; check out our Audit Guide for more information on the process.

*This is not intended to be, and is not tax advice. It is always wise to check with a tax professional if you have any questions before filing your taxes. 

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