1. Teachers' Deductions for Certain Expenses
Primary and secondary school teachers buying school supplies out-of-pocket could possibly take an above-the-line deduction of up to $250 for unreimbursed expenses. This deduction was made permanent and indexed for inflation.
2. State and Local Sales Taxes
Deductions for state and local sales tax was made permanent. Taxpayers that pay state and local sales tax can deduct the amounts paid on their federal tax returns (instead of local and state income taxes) as long as they itemize.
3. Mortgage Insurance Premium
Mortgage insurance premiums (PMI) are paid by homeowners with less that 20 percent equity in their homes. These premiums were deductible in tax years 2013, 2014, and again in 2015. This deduction has also been extended through 2016.
4. Exclusion of Discharge of Principal Residence Indebtedness
Typically, forgiven debt is considered taxable income in the eyes of the IRS. There is a tax provision that has been extended through 2016 allowing homeowners whose homes have been foreclosed on or subjected to short sale to exclude up to $2 million of canceled mortgage debt. Also included are taxpayers seeking debt modification in their home.
5. Energy Efficient Improvements (Including Appliances)
This tax break has been around for some time, but if you made your home more energy efficient in 2015, now is the time to take advantage of this tax credit on your 2015 return. The credit reduces your taxes instead of a deduction that reduces your taxable income and is 10 percent of the cost of building materials. These items include insulation, new water heaters, or a wood pellet stove.
This tax is cumulative, so if you have taken the credit in any tax year since 2006, you cannot take the full $500 tax credit this year. For example if you took a credit of $200 in 2013 the maximum you could take is $300.
6. Qualified Tuition Expenses
The deduction for qualified tuition and fees, which has been extended through 2016, is an above-the-line tax deduction. This means that you don't have to itemize your deductions to claim the expense. Taxpayers with income of up to $130,000 (joint) or $65,000 (single) can claim a deduction for up to $4,000 in expenses. Taxpayers with income over $130,000 but under $160,000 (joint) and over $65,000 but under $80,000 (single) can take a deduction of up to $2,000. Taxpayers with income over these amounts are not eligible for the deduction.
Qualified education expenses are defined as tuition and other related expenses that are required for enrollment or attendance at an eligible educational institution. These expenses include student-activity fees and expenses for books, supplies, and equipment required by the institution.