Tax time is upon us, and you know what that means: either big refunds or big bills. Paying taxes is a necessary evil, but you shouldn’t rely on Uncle Sam to provide you with a fair deal. Clerical errors and deduction oversights could be costing you thousands each year—money better applied to credit repair: Remember that every dollar spent on reducing credit card debt will likely work to raise your credit scores. For that reason, consider the following deductions, and apply them to your life. A larger refund —and a higher credit score—may be your reward.
1. Green home updates. The latest DIY credit repair service is an environmental one as well. Rather than a tax deduction, this tax credit allows you to claim up to $500 of certain expenses to be subtracted directly from the tax balance owed. Such green home expenses include:
• Solar panels
• Solar water heaters
• Geothermal heat pumps
• Efficient windows
2. Private Mortgage Insurance (PMI). Homebuyers with down payments of 20% or less understand PMI all too well. It is a fee attached to a mortgage to safeguard the bank in cases of default. Once the equity in your home exceeds 20%, PMI fees are usually waived. As part of the Tax Relief and Health Care Act of 2006, PMI payments were tagged as tax deductible along with mortgage interest. Households with annual incomes of up to $109,000 benefit from this deduction. Why not take advantage of Uncle Sam’s attempt at credit repair service? Deduct your PMI while you still can.
3. Good deeds gone wrong. It’s been a tough year for many families and businesses. Kindness may have incited you to lend money to a relative or friend to aid their credit repair efforts. The only problem? Sometimes they won’t pay you back. Unlike big businesses, losing money yourself isn’t as simple as charging it off. Despite the red tape, you may qualify to reclaim up to $3,000 in bad debt per married couple, or $1,500 for spouses filing separately. Legitimizing “worthless” debt involves:
• Proving the loan was made in the first place
• Records of attempts to collect the debt, whether through direct contact or through the court system
• Proof that the debt is worthless, e.g., if your relative simply refuses to repay or had the debt charged off in bankruptcy
It may be a long shot, but deducting $3,000 from your taxable income total could buy a lot of credit repair and improvement. Don’t give up so easily.
4. Part-time commuting costs. Good news for you part-timers holding down multiple jobs: a tax break is on the way. While the everyday costs of commuting to work are not tax deductible, time spent commuting from one job to another is considered a business expense. Count up the hours spent driving from Job 1 to Job 2 and verify the info with your tax preparer. The money saved may be applied to bringing down your revolving credit balances and enhancing your credit repair efforts as a direct result.
5. Elderly parent care. If you face the daunting task of caring for an ill or elderly parent, tax time could present a much-needed break. Children providing more than 50% of financial support to their parents may deduct applicable living and medical expenses from their personal taxes. This break comes with one caveat: support provided must exceed 7.5% of your Adjusted Gross Income (AGI). Do the math to see if you qualify. You deserve a refund.