When you sit down to do your tax return, you won’t find new twists as a result of federal tinkering.
Congress brought back some of the old favorite deductions that were going away, and that’s basically the extent of it. For example: Seniors over 70 1 / 2 will be able to give money to charity directly out of IRAs rather than withdrawing the money and paying taxes on it under minimum distribution rules. Teachers will be able to get a deduction for $250 if they spend their own money on items for their classrooms. People will have a choice between deducting state and local sales taxes or state income taxes on their federal forms.
But even though Congress tweaked little, you may have gone through personal changes that make it possible to claim deductions and credits you couldn’t in the past. Pay particular attention if your income has decreased, you had children of your own or adopted, paid for college, changed jobs, started to care for a parent, or had expensive treatment for medical problems.
Here are some notable credits and deductions:
Earned income credit: The earned income tax credit is especially helpful to low- and moderate-income people. “It’s the reward for working,” notes Greg Rosica, a contributor to EY Tax Guide 2016. To qualify, a single person without children needs adjusted gross income below $14,820. Married couples with incomes up to $53,267 may qualify with three or more children.
Child tax credit: If you had a baby last year, or have children under 17, you can claim a $1,000 credit for each child, although this benefit starts to phase out for people once their incomes rise. For the full credit, the income limit for couples is $110,000. For singles it’s $75,000. If you adopted a child in 2015, there’s a credit up to $13,400 on expenses.
Day care for kids and parents: There’s relief for families paying for care of either children, parents or other relatives. If you have children no older than 12, the credit will partially cover expenses up to $6,000 in day care depending on your income. You must be working or looking for a job. Also, if you are caring for a parent or relative, you may be able to claim a credit for expenses such as adult day care. See Publication 503.
College relief: Students in their first four years of college or a technical program should consider the American Opportunity Tax Credit for up to $2,500 in relief. If you are taking a course for work, one that doesn’t lead to a degree, consider the Lifetime Learning Credit for up to $2,000 each year you pursue your education. There are income phaseouts, however, with the full credit available for couples with up to $160,000 in modified adjusted gross income and $130,000 for the lifetime credit. If your income is too high for the credits, consider using the tuition and fees deduction. If you have student loans, interest is deductible for singles with incomes up to $80,000 or $160,000 for couples. See Publication 970.
Job searches: If you spent at least 2 percent of your adjusted gross income trying to get a new job, you can deduct expenses such as travel, parking, lodging, printing resumes and postage – even meals while away from home. If you move for a new job, those expenses may also be eligible.
Foreclosure relief: Typically, people have to pay income taxes on any relief they are given on their mortgages in a foreclosure or short sale, but Mark Luscombe, tax analyst with Wolters Kluwer, notes the tax is waived under the mortgage discharge exclusion for 2015.
Small business: If you have your own business in or outside your home, you can write off some of the cost on equipment ranging from computers to furniture in 2015, said Rosica. You will use the bonus depreciation provision, which means you could deduct $50,000 on $100,000 of equipment.
Medical expenses: If your medical costs exceeded 10 percent of your adjusted gross income, or 7.5 percent as a senior, you can deduct the amount over the threshold – everything from doctors to dentists and hospitals, plus transportation to health care.
Energy friendly: You might be able to take the electric motor vehicle credit for a car or home energy improvements like windows.