LIFER LEARNING CREDIT
The lifetime learning credit is designed to help college students, but its loose qualifications leave some interesting loopholes. To qualify, you have to be paying for yourself or your qualifying child. You also have to be going to an eligible educational institution.
Here’s where the loophole comes in: You can take this credit forever. There is no limit, and although you can be working toward a degree, you can also take classes to improve job skills, such as cooking classes for a chef or caterer, scuba classes to hone your skills as an instructor and more.
NEW MEXICO’S CENTENARIAN DEDUCTION
For those fortunate enough to live to be 100 years old, moving to New Mexico will cut your tax bill because you won’t have to pay state taxes. A caveat: You cannot take the deduction if someone else can claim you as a dependent, so you might want to just say no to living with your kids during your golden years. Although sidestepping the expense of state income tax might not be a huge break, consider it a perk for sticking around for over a century.
ROTH IRA CONVERSION WORKAROUND
Roth IRA accounts are retirement savings accounts that let you contribute money today, with no tax benefit, in exchange for getting to withdraw all funds, including gains and interest, tax-free during retirement. Although this benefit is restricted from the wealthy by income limits that prohibit Roth IRA contributions by those making more than a certain amount per year, there is a gaping loophole that allows anyone, regardless of income, to convert a traditional IRA into a Roth IRA.
To convert, you have to pay taxes on the gains and interest. But if you convert often, it won’t add up to much. In other words, this loophole lets you have a Roth IRA regardless of the income limits. Some folks go so far as to call it, a Backdoor Roth IRA.
PERSONAL POOL DEDUCTION
Install a pool for medical treatments and you could be in for a big tax break. One taxpayer suffering from emphysema and bronchitis was prescribed swimming by his doctor as part of his treatment, so he built a pool and wrote off a portion of the costs as a medical expense. He could deduct only the amount by which the installation cost exceeded the home’s increase in value, but he did get to include upkeep costs.
SAVE WHILE MOVING YOUR PETS
To deduct moving expenses, your move must be for work purposes, and it has to pass a qualifying test. First, your move must occur relatively close in time to when you start new employment, usually within one year. Second, your new main job location must be 50 miles farther away from your old home than your original job location.
Deductible expenses include moving your pet and all of its pet supplies, which can rack up savings, especially if you’re flying Fido across the country.
