Top 5 New Income Tax Deductions for 2013
All those folks still sorting out how the fiscal cliff debate affected them will probably want to take a moment to look over the tax deductions created or extended by the American Taxpayer Relief Act of 2012. That's basically the tax portion of the fiscal cliff fix, and it just added a bunch of writeoffs to a collection of breaks most Americans miss anyway.
According to Rebecca Pavese, head of the tax practice at wealth management group Palisades Hudson Financial , American taxpayers are already missing a whole lot of simple deductions that existed well before the fiscal cliff. Pavese notes, for instance, that because it's usually a one-time expense, most Americans don't write off the costs of a job-related move or money they spent installing energy-saving windows, doors and insulation for their home.
Taxpayers also often tend to miss out on deductions for adoption costs, which can run into the thousands of dollars. In the case of members of couples who adopt their partner's child, the $12,650 benefit for second-parent adoption is the only such benefit extended to same-sex couples whose marriages are recognized by their home states.
Even some IRA contributions made until April 15 can be deducted, including Simple IRA, SEP IRA or Keogh plans. Taxpayers who apply for an automatic extension can include those when they file as late as Oct. 15 of this year.
Once taxpayers are up to speed on those deductions, they can start saving even more money by factoring these five fiscal cliff fixes into their 2012 filing
Are you one of the fortunate indebted graduates who was able to put some of that graduation money toward your student loans? It turns out early, voluntary interest payments are now deductible.
You can deduct the full amount of student loan interest -- up to $2,500 annually - even if you paid more interest than required, Pavese says. You can also deduct interest for as long as you have the loan instead of just for the first 60 months, as was the case before the new law changed that stipulation permanently. You may have entered the real world with some crushing debt, but at least it's deductible debt.
Cancellation of mortgage debt on a principal residence
Think the housing crisis is getting better? Just ask the folks on the selling end of a short sale and see what their answer is.
Short sales are getting a lot of homeowners out from under water and taking a lot of homes off the banks' hands, but that escape route almost came at a cost. Thanks to the fiscal cliff fix, if a lender forgave homeowners' mortgage debt through 2013 - basically said they were off the hook for whatever the selling price of the house didn't cover -- you don't have to report that amount as income.