Many of the current income tax credits and deductions were scheduled to expire at the end of 2012, but the federal government has decided to extend some of these credits into 2013 or longer. The credit extension is good news for several taxpayers, including those with children, those who are employed as educators, and those who take retirement distributions. Here's a look at a few of the tax credits that been extended into 2013.
1. Deductions for Qualified Educator Expenses
Are you a public school or private school educator? Then you'll be happy to know that the educator expense deduction has been extended through tax year 2013. This means that you'll be able to write off up to $250 of your qualified supplies for your classroom as an adjustment to income. Since the credit is available through 2013, you'll be able to claim it when you file your tax return in 2014.
2. No Tax on Retirement Distributions That are Used for Charity
The government has extended a unique tax break for individuals who receive distributions from their qualified retirement plans such as IRAs and 401(k)s. If you are at least aged 70 1/2 and you receive an ordinary distribution from your retirement account, you can claim a complete tax exemption on the distribution if you direct it all to a qualified charitable organization. As an example, if you meet the age threshold and you remove $5,000 from your retirement plan in 2013, you will be exempt from taxation on it if you donate the entire amount to charity.
3. Earned Income Credit for Three or More Children
Low-income families who have two children have been able to take advantage of the Earned Income Credit for years, but the government has extended a special provision for those that have at least three children. These families can claim an additional amount of Earned Income Credit for their third child through tax year 2017. The Earned Income Credit is subject to income limitations and filing status requirements.
4. The American Opportunity Education Tax Credit
This credit, which is designed to give relief to taxpayers who are paying for qualified tuition expenses, has also been extended through 2017. Individuals who claim the American Opportunity Education Tax Credit can receive a tax credit of up to $2,500 when they pay for tuition at a four-year college or university out of their own pockets.
If you've been anticipating a higher tax bill this April, you may be able to take advantage of these extended tax credits. Claiming them correctly can give you a substantial tax break on April 15.