New and Oft-Overlooked Deductions

There's a lot to remember during tax season and the tax code only gets more complicated each year. There are a number of often overlooked deductions, plus you'll now have the new American Taxpayer Relief Act.

There’s a lot to remember during tax season and the tax code only gets more complicated each year. So considering the stress of filing, it makes sense that people forget things or make mistakes.

Unlike most deductions or credits, which occur annually, some can only be taken only once in a while. That’s why they are easy to miss.

Among the ones that can slide by are:

Moving expenses

You may be able to deduct qualified moving expenses if you moved because of a change in your job location or because you started a new job.

Residential energy credits

Taxpayers are eligible for these credits for installing energy-saving windows, doors, insulation and the like.

Adoption expenses

You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses, according to the IRS. (For details, see Form 8839, Qualified Adoption Expenses.)

IRA contributions

Some can be made past April 15. If you’re eligible, you can make deductible contributions to a standard IRA until April 15. But you can contribute to a SIMPLE IRA, SEP IRA or Keogh plan up until you file your return. If you apply for an automatic extension, you can file as late as Oct. 15, 2013.

New changes

In addition to the oft-overlooked deductions, taxpayers should also know about income-tax deductions that were created or extended by the American Taxpayer Relief Act of 2012.

Deductions created, extended or made permanent by the new law include:

Student-loan interest

Voluntary interest payments are now deductible. You can deduct the full amount, up to $2,500 yearly (subject to income phase-out limitations), even if you paid more than required. And you can now deduct interest as long as you have the loan, not just for the first 60 months, as was the case. The new law makes that change permanent.

Cancellation of mortgage debt on a principal residence

If a lender forgave you mortgage debt through 2013, you don’t have to report that amount as income.

Donating land for conservation

Taxpayers who donated capital-gain real property for conservation purposes in 2012 — usually by putting a conservation easement on it — can deduct the contribution up to 50 percent of their adjusted gross income. The old limit was 30 percent.

Private mortgage insurance (PMI) premiums

PMI premiums are now treated just like qualified residential mortgage interest and are deductible. This deduction is commonly missed because PMI premiums have only recently been deductible.

Child tax credit

The new law permanently extends the credit. You can get a $1,000 credit for each dependent child under 17. The catch: the credit starts to phase out for married couples with $110,000 of modified adjusted gross income; at $75,000 for single taxpayers. The credit is reduced by $50 for each $1,000 of income above the threshold amount.

Rebecca Pavese, CPA, is head of the national tax practice at Palisades Hudson Financial Group, a fee-only financial planning firm and investment advisor. She is in its Atlanta office and can be reached at rebecca@palisadeshudson.com.