This post was reviewed and updated Wednesday, April 5, 2017
A sin of omission basically is a failure to do something you can and should do. They happen all the time in our daily lives, often inadvertently.
Even, or many would say especially, at tax time.
Tax sins of omission typically are failing to claim tax breaks for which we're eligible.
And while the annual April consequences of overlooked tax breaks aren't quite as severe as their Biblical counterparts, tax sins of omission could be very costly.
To ensure that your annual interaction with the Internal Revenue Service this year isn't painfully sinful, at least from the financial standpoint, here are some tax breaks you shouldn't omit from your return if you're eligible.
1. Improve your career skills
The Lifetime Learning credit could cut up to $2,000 off your tax bill if you enrolled in eligible classwork. As the name indicates, this tax credit isn't limited to just younger students; it covers educational costs throughout a taxpayer's lifetime. That means a computer course that enhances your workplace contributions could count toward this tax credit.
The nice thing about the Lifetime Learning credit is that there is no limit on the number of years it can be claimed for each student. The nicer thing about the Lifetime Learning credit is it's a tax credit, meaning it directly reduces dollar for dollar any tax you owe.
2. Make retirement pay off now
Stashing some cash for your post-work years is always smart. Even smarter is claiming the retirement saver's contribution credit. When you put money into a retirement account, either a Roth or traditional individual retirement account or a workplace plan like a 401(k), you can get a tax savings of up to 50 percent of the first $2,000 you contribute. That translates into a $1,000 tax credit. There are income limits which reduce eligibility and the amount of the credit, but it's worth checking into.
3. Add to your home's energy efficiency
If you made some relatively easy energy-efficient improvements to your home last year, such as adding insulation or replacing drafty windows, check out Nonbusiness Energy Property Credit. If you've never claimed this tax break before, it could be worth a tax savings of up to $500 on your 2016 tax return.
Unfortunately, last year was the last year that this tax credit was available. Congress might renew it, but nothing's guaranteed in D.C. So if your home energy upgrades in 2016 qualified, don't miss out on this possibly last chance tax break. Details are on Form 5695 and its instructions.
4. Maximize medical deductions
Taxpayers who itemize know that medical expenses are the first items listing on Schedule A. They also know it's now harder to claim them since they must exceed 10 percent of your adjusted gross income. So don't overlook ways to bulk up these deductible costs.
Be sure you count your travel expenses to and from medical treatments, including trips to pick up prescriptions or even to some medical conferences. You can find more in my earlier post about medical costs that might make you feel better at tax filing time.
5. Count all of your charitable acts
There are ways your charitable nature can pay off at tax time beyond the check you wrote or the donation of goods you made to your favorite nonprofit. Check your cell phone bills for any contributions you made via text. This is an increasingly popular way to donate, but many people forget these easy charitable gifts at tax time.
Also look at your actual charitable activities. Did you volunteer for a charity? Your time isn't deductible, but the miles you drove for the qualifying charitable organization's project, such as delivering meals to the home-bound, count. So do unreimbursed supplies you provided the group.
Even getting more active could pay off. If you cared for an animal (or two or more) as part of your local shelter's foster program, you may be able to write off those costs, including food and any veterinary bills. Just make sure the animal rescue group is an IRS qualified nonprofit and it provides you with proper documentation of your service.
See Also: 12 often overlooked tax breaks
6. Calculate your carryovers
Check your 2015 tax return. Did you have any deductible carryovers, such as for excess capital losses or hefty charitable donations you weren't able to use that year? Be sure to put them to use this tax year.
For most of us, it's the capital loss that will apply. Remember, you can use up to $3,000 of net capital losses to offset ordinary income in a tax year, with the rest held to be carried over for use in future years. You can keep claiming the excess in $3,000 increments for as long as it takes to use them up.
Note to self if you're carrying asset losses over and over and over: Get a new investment adviser.
As for the charitable carryover, if you happened to come into a lot of cash and were very generous with your windfall, you might have donated more than you can deduct. The deduction for most charitable contributions is limited to 50 percent of your adjusted gross income. If you gave more than that percentage, you can carry over the excess for five tax years.
7. Claim all your dependents
Tax dependents offer an immediate tax benefit. Most of us get an exemption, which is a dollar amount subtracted from our adjusted gross income, for ourselves, our spouses and each eligible dependent. For 2016 taxes that's $4,050 per person.
But dependents aren't limited to your children. A parent or other relative could qualify. Even someone not actually related to you, say that mooching "it's still a tough job market" boyfriend who won't move out, might get you an added exemption claim.
8. Make your home office work
A lot of folks still worry about claiming a home office. They're afraid it will mean an automatic audit. That might have been the case years ago, but it's no longer a bright red flag. Others decide not to claim this expense because it's a hassle, even with tax software, to fill out the forms. In this instance, consider claiming the simplified home office deduction. The simplified method will limit your home office write-off to a maximum $1,500, but that's better than nothing.
9. Benefit from the EITC
The Earned Income Tax Credit, or EITC, is often thought of as a tax break for the poverty stricken. It's true that it is a major help for the working poor. But even folks with moderate incomes might qualify. Still, the IRS estimates that one out of every five people who is eligible for the EITC won't claim it.
That's a costly tax sin of omission. Depending on filing status and income, the EITC could be substantial. A married, jointly filing couple with three kids and income of less than $53,505 in 2016 could get a credit of up to $6,269 on that year's tax return. This will wipe out taxes owed and if the EITC amount is more than your tax bill, you'll get the excess as a refund.
10. Keep good records
OK, this isn't technically a tax break. But you probably noticed that all the previous tax sins of omission require you to show or substantiate your claims.
If you don't have adequate tax records to do just that, the IRS examiner will disallow them. And that will indeed be very costly. In addition to paying more taxes you didn't think you owed, you'll end up facing penalty and interest charges, too.
So make sure in this final week before your 1040 is done, you don't make any of these potentially costly tax sins of omission.
And coming tomorrow, tax sins of -- oooooh! -- commission.