Although the tax code is complicated and thorny, there are potential ways to reduce your bill.
CLAIM YOUR CREDITS Tax credits provide a dollar-for-dollar reduction of your income tax liability, which is why they are the best way to save. Here are some of the most popular ones:
EARNED INCOME TAX CREDIT This is a refundable credit for married couples who in 2016 earned income under $53,505 and for singles who made less than $47,955. Your income and family size determine the amount of the credit, but the maximum credit is $6,269 this year.
CHILD TAX CREDIT Parents can get a credit up to $1,000 for each qualifying child who was under the age of 17 at the end of 2016. This credit phases out for married filing jointly, or MFJ, earning more than $110,000 ($75,000 for singles).
CHILD AND DEPENDENT CARE CREDIT If you pay someone to care for your dependent (under age 13) so you can work or look for a job, you can claim 20 to 35 percent of your child-care expenses up to $6,000, depending on your income.
AMERICAN OPPORTUNITY TAX CREDIT This refundable credit of up to $2,500 per student for undergraduate college expenses can help a range of taxpayers, including those who owe no tax. (The credit is limited to singles who earn up to $80,000 or up to $160,000 for married filing jointly couples.)
LIFETIME LEARNING CREDIT This is another credit for the costs of postsecondary degree education or courses to improve job skills. In order to claim this credit of up to $2,000, single adjusted gross income, or AGI, must be less than $65,000 ($131,000 MFJ).
DEDUCT AWAY If your deductible expenses exceed the 2016 standard deduction limits of $6,300 for single and $12,600 MFJ, you should itemize and grab write-offs such as: miscellaneous deductions, which includes tax-preparation fees, job-hunting expenses and professional dues, if they total more than 2 percent of your adjusted gross income; medical and dental expenses that exceed 10 percent of AGI or 7.5 percent if either you or your spouse is age 65 or older; standard mileage rates for business use of your vehicle is 54 cents per mile, for medical care at 19 cents and for charitable use at 14 cents.
LET UNCLE SAM HELP YOU SAVE FOR RETIREMENT When you make a contribution to an Individual Retirement Account (IRA or Roth IRA), the government provides you with tax benefits. Your total contributions to all IRAs cannot be more than $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year, if your compensation was less than the dollar limit. If you’re covered by a retirement plan at work, you may also be able to deduct contributions to an IRA, subject to income limits.
BEWARE THE ALTERNATIVE MINIMUM TAX (AMT) The government created the AMT to penalize higher-income taxpayers who use deductions and credits to wipe out tax liability. It’s an alternative computation of your tax, with different deductions, add-backs and flat rates.
HELP DEFRAY LONG-TERM CARE INSURANCE COSTS The IRS allows for a deduction of a portion of your premiums for this expensive coverage. The deal gets better as you age: If you’re over 70, you can deduct $4,870, but under 40, you can write off just $390.
GET BIG HELP FOR YOUR SMALL BUSINESS If you have a small business with fewer than 25 full-time employees, there is a health care tax credit that can put money in your pocket. Check the rules, but if you paid at least half of employee insurance premiums and purchased coverage through the SHOP marketplace, you may be able to receive a credit on a sliding scale.
Jill Schlesinger, a certified financial planner, is a CBS News business analyst. She welcomes questions and comments at firstname.lastname@example.org