Don't Miss These Tax Breaks

Last Updated Apr 1, 2011 3:39 PM EDT

It's hard enough to part with our money come tax season. What's worse is if we accidentally pay more than we really should. Yet that is the case for millions of taxpayers, especially for those who simply take the standard deduction instead of itemizing. In fact, the General Accounting Office found back in 2002 that approximately 2.2 million taxpayers overpaid their taxes by close to $1 billion. With taxes getting only more complicated, it's likely that figure has remained high.

This past Saturday I stopped by The Early Show to help remind viewers of some of the most commonly overlooked tax breaks that could help save them some money this tax season. In case you missed the spot, here's what we discussed. The video is also embedded below.

Extended Tax Breaks from 2009

Late in December 2010 Congress decided to extend some helpful tax breaks from 2009 into 2010. For example, the Educator Expense Deduction allows teachers to deduct up to $250 of out-of-pocket unreimbursed classroom expenses, from stationery to books. If you are a homeowner who paid mortgage insurance in 2010, the premiums are tax deductible once again for this year's filers. (In the Early Show segment, I accidentally failed to mention the key word "mortgage" before "insurance." Apologies for the confusion!)

IRA Contributions Made by April 18, 2011

You can deduct contributions made to a traditional individual retirement account (IRA) from your 2010 taxable income as long as the contributions are made prior to April 18, 2011. If you've yet to do this, you still have a few weeks left. If you are under 50 years of age, the maximum contribution is $5,000. If you are 50 years of age, you can contribute up to $6,000.

Out-of-Pocket Medical Expenses

The IRS lets taxpayers deduct many out-of-pocket medical and dental expenses if they surpass 7.5% of one's adjusted gross income. So if your AGI was $50,000, for instance, your expenses need to total at least $3,750. That may seem like a high bar - but keep in mind there are many expenses that qualify, including health insurance premiums for those who are self-employed or purchase individual insurance policies. (If you receive group health insurance from an employer or pay through COBRA, sorry; your share of the premiums are not tax deductible.) Some other qualifiable deductions include: eyeglasses, contact lenses, elective surgery like Lasik, hospital services fees and, just added this year -- breast pumps.

Indirect Charitable Contributions

Donating $100 to the Red Cross -- which earns you a deduction -- isn't easy to overlook. But throughout the year you may have forgotten about some indirect charitable expenses that are equally deductible. Examples could include stamps purchased for a fundraiser mailing, mileage driven to and from a volunteering event and ingredients purchased for meals you prepared for a local shelter or soup kitchen.

Earned Income Tax Credit

If you lost your job or suffered a drop in income in 2010, you may qualify for the Earned Income Tax Credit, which is a refundable federal income tax credit for low- to moderate-income working individuals and families. For tax year 2010, the IRS has expanded the credit to include more taxpayers. The maximum credit for a person or couple without qualifying children is $457. With one qualifying child it's $3,050; with two qualifying children, $5,036; and with three or more qualifying children, $5,666.

Job Search Expenses

If you were searching for a job in your current field in 2010 -- even if the search was unsuccessful -- some of the related expenses can count as a tax deduction. For example: resume printing and mailing, mileage driven to and from interviews, employment or staffing agency fees, business cards, etc.

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    Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new book Psych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at www.farnoosh.tv and on Twitter at @farnoosh.

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