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Filing an income tax return can result in owing additional taxes to the government, but it is possible to get a tax refund if you pay too much income tax during the year. The Internal Revenue Service offers a variety of tax breaks that filers can claim to reduce tax liability and increase refunds. The tax breaks you can claim to get a bigger refund depend on your personal tax situation, as tax incentives tend to have strict eligibility requirements and other limitations.
For tax year 2012, the government offers a tax exemption for $3,800 for each dependent you claim on your tax return. A dependent is generally a person that lives with you and that you support financially, like your child or a relative that lives in your household. Your child qualifies as your dependent if he lives with you more than half the year, does not provide more than half of his own support, does not file a joint return and is under the age of 19 at the end of the year or 24 if a full-time student. Disabled children can qualify at any age. A person who lives with you as a member of your household and has a gross income under $3,800 counts as a dependent relative if you provide at least half of his support for the year.
When you file a tax return, you can choose to take a standard deduction or the sum of your "itemized deductions." Itemized deductions include a variety of common costs you may incur during the year, such as real estate taxes, home mortgage interest, home office expenses, business travel costs and donations to charity. If the total of your itemized deductions exceeds your standard deduction, you stand to save money by claiming your itemized deductions. The standard deduction is $5,950 for single filers and $11,900 for joint filers for the 2012 tax year.
Above-the-line deductions are special tax deductions that you can claim regardless of whether you choose to use your standard deduction or itemized deductions. Contributions you make to a tax-deductible individual retirement account or similar tax-advantaged plan count as above-the-line deductions. The IRS offers deductions of up to $4,000 for college tuition and fees and $2,500 for student loan interest you can take even if you don't itemize. Other above-the-line deductions include alimony paid, half of self-employment taxes, health savings account contributions and up to $250 in educator expenses.
Tax credits directly reduce the amount of tax you owe, which can significantly boost the size of your tax refund. Common tax credits include a $1,000 Child Tax Credit for taxpayers with dependent children under the age of 17, a credit for childcare expenses you incur so that you can work and credits for energy efficient home upgrades. You can take tax credits regardless of whether you itemize your deductions.
- Internal Revenue Service: Six Important Facts about Dependents and Exemptions
- Internal Revenue Service: Publication 501
- Internal Revenue Service: Six Facts about Choosing the Standard or Itemized Deductions
- Internal Revenue Service: SCHEDULE A - Itemized Deductions
- Bankrate.com: Cut Your Taxes Without Itemizing
- SmartMoney: Tax Credits for All
- Internal Revenue Service: In 2012, Many Tax Benefits Increase Due to Inflation Adjustments
- Internal Revenue Service: Tax Benefits for Education: Information Center