Last-chance tax breaks for parents and homeowners

Family sitting outside their home

(ARA) — Uncle Sam is handing out a few extra breaks to parents and homeowners on their 2011 and 2012 tax returns. Although the filing deadline is months away, some of these tax benefits require forward planning. Others may influence decisions you make now about child care, college and your home.

The easiest credit parents can claim is the Child Tax Credit, says Jessi Dolmage, spokesperson for TaxACT. "By simple virtue of being a parent, you can claim $1,000 for each eligible dependent on your 2011 and 2012 returns. Even better, you can receive cash back for the credit, as long as your earned income is over $3,000 and your tax liability is less than the credit."

Daycare can account for a big chunk of working parents' income. Fortunately, you can recoup some of those costs with the expanded Child and Dependent Care Credit in 2011 and 2012. The credit is worth between 20 and 35 percent of up to $3,000 of qualified expenses per child under the age of 13, or $6,000 for two or more children. The credit amount decreases as adjusted gross income increases.

Parents who initiate and finalize an adoption by the end of 2012 may qualify for the expanded Adoption Credit. For 2011, the credit is worth up to $13,170 and is refundable (like the Child Tax Credit). In 2012, the maximum amount changes to $12,170 and becomes non-refundable. Keep in mind the IRS requires adoption documents and Form 8839 to be mailed with your return. It takes 6 to 8 weeks for mailed returns to be processed, so select direct deposit rather than a check for the fastest refund.

College costs are higher than ever, but so are the available tax breaks. The refundable American Opportunity Credit, expanded Student Loan Interest Deduction and expanded Coverdell Education Savings Accounts contribution limit add up to $7,000 in savings on 2011 and 2012 federal returns. Plus, you can deduct up to $4,000 in tuition and fees from your 2011 income.

Dolmage also notes, "For the first time in three years, there won't be a homebuyer credit available on federal returns. However, homeowners can still save on taxes in other areas."

The Nonbusiness Energy Property Credit is worth up to $500 for insulation, exterior windows and doors, central air conditioners, water heaters and other improvements. Caps have been placed on furnaces, water boilers, windows, water heaters, air conditioners and biomass stoves. In addition, if you claimed the credit on your 2009 or 2010 returns, you must subtract the collective amount from the $500 available for 2011.

Investing in solar hot water property, geothermal heat pumps and wind property before Dec. 31, 2016, also has tax benefits. The nonrefundable Residential Energy Efficient Property Credit allows you to claim 30 percent of the expenditures, although certain improvements have caps.

Depending on your adjusted gross income, mortgage insurance premiums paid on a qualified mortgage can count toward your 2011 mortgage interest deduction.

Tax preparation software is helpful for navigating all tax situations, but especially those for parents and homeowners, reminds Dolmage. "The IRS has several requirements for each tax benefit and a very specific definition of dependents. Software guides you through the details and then calculates your maximum amount. Solutions like TaxACT also include features to help users navigate major life changes, which certainly include adoption and college."

Learn more about these and other tax breaks at and Estimate your 2011 federal and state taxes for free as early as October with Preview Versions of TaxACT.

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Upcoming Tax Dates

July 1 — Occupational excise taxes
File Form 11C to register and pay the annual tax if you are in the business of accepting wagers.

July 4 — Everyone
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July 27 — Communications and air transportation taxes under the alternative method
Deposit the tax included in amounts billed or tickets sold during the last 15 days of June.

July 29 — Regular method taxes
Deposit the tax for the first 15 days of July.

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