As summer fades away, the Internal Revenue Service is already looking ahead to the next tax season. In recent weeks, it's been sending out reminders about some overlooked ways to lower your tax bills.
Here's a quick look at two of them.
Retirement deductions
The so-called "Saver's Credit" is a good way for low- and moderate-income individuals to pick up tax credits for contributions to their 401(k) or IRA accounts.
Aimed at encouraging retirement savings, the Saver's Credit allows tax credits of up to $1,000 (or up to $2,000, if filing jointly) for those who make contributions to a qualifying 401(k), IRA or other retirement plans.
For 2008, it applies to those with incomes up to $39,750 for head of households, or incomes up to $53,000 for married couples filing jointly.
The credit is a percentage of your retirement plan contribution, with the exact amount determined by your filing status, adjusted gross income and your other retirement contributions.
Launched in 2002 as a temporary provision, it was made permanent by Congress in 2006.
IRS spokeswoman Kathy Howell says it's a tax credit that is often overlooked.
"If a taxpayer discovers they've missed this tax break in the past," she said, "they can file an amended return to retroactively claim their savings and get a tax refund."
You have up to three years after your tax return's original due date to file an amended form, IRS Form 1040X.
To learn more about the Saver's Credit, see IRS Publication 590, "Individual Retirement Arrangements," Chapter 5.
Education tax credits
To help curb the cost of college education, there are two primary tax credits that offer some relief.
Both are based on qualified education expenses, such as tuition and enrollment fees, but may be limited by your adjusted gross income. They do not cover housing or personal living expenses.
The Hope Credit, which is a tax credit up to $1,800 per student per year, is good for the first two years of college or vocational school.
The Lifetime Learning Credit, which is up to $2,000 per tax return, applies to undergraduate, graduation and professional degree courses. There is no limit to the number of years you can take this credit.
Racking up interest on student loans? You may be able to deduct up to $2,500 from your income per tax return. And you can take the deduction even while your student is enrolled in school if you are currently paying the interest.
Note: You cannot claim the Hope Credit and the Lifetime Learning Credit for the same student in the same tax year. Choose the credit that provides the greater benefit.
However, the IRS lets you simultaneously claim one of the tax credits and a deduction for student loan interest.
For more information, go to IRS Publication 970, "Tax Benefits for Education."
All tax forms can be found at www.irs.gov or by calling (800) TAX-FORM (800-829-3676.)
Call The Bee's Claudia Buck, (916) 321-1968.
About Comments
Reader comments on Sacbee.com are the opinions of the writer, not The Sacramento Bee. If you see an objectionable comment, click the "report abuse" button below it. We will delete comments containing inappropriate links, obscenities, hate speech, and personal attacks. Flagrant or repeat violators will be banned. See more about comments here.