Earlier this week, H&R Block released the results of a study showing that Boston was one of the 10 most taxed cities in the country. In order to find out why and what you can do to lower your tax burden, Boston.com conducted an e-mail interview with Jeff Pirner, a district manager with H&R Block in Boston.
Boston.com: Why does Boston have such a heavy tax burden?
Jeff Pirner: Boston is a major metropolitan city where the overall tax burden is based on a multitude of factors, including property values that are higher than the national average, a federal and state income tax based on Bostonians’ income, and other taxes citizens are exposed to for a daily purchases such as sales and auto taxes.
Boston.com: Are there any tax breaks specific to Boston residents?
Pirner: There are no specific tax breaks for Boston residents, but it is important for every consumer to understand and take advantage of every credit and deduction to which they are entitled. It’s critical for consumers to seek the advice of a qualified tax professional who can direct you to little known provisions such as the Massachusetts Income Tax deduction for certain commuting costs such as EZ Pass or MBTA passes which has up to a maximum deduction of $750.
There is also the Massachusetts Circuit Breaker Tax Credit for those aged 65 or older. The Circuit Breaker Tax Credit is an state income tax credit for real estate taxes, including water and sewer debt charges, up to $1,000 depending on income levels. Massachusetts also has state tax credits for repairing or replacing failed septic systems, residential installation of solar and wind energy systems, and removing or covering lead paint on residential premises.
Boston.com: What tax breaks do people most commonly miss?
Pirner: Three of the most commonly overlooked federal tax breaks include:
1. Education credits: The American Opportunity Credit was extended through 2017, allowing taxpayers to claim up to $2,500 for each of the first four years of college education for each student. The Tuition and Fees Deduction provides a reduction in taxable income of up to $4,000, and the Lifetime Learning Credit is worth up to $2,000 per return for post-secondary degree programs or courses taken to improve job skills.
2. Inaccurate filing status: It is very important to accurately assess filing status as it determines the amount of the standard deduction. Unmarried individuals with children may be eligible to file as head of household which has a larger standard deduction than is available to single individuals. For some married taxpayers, changing their filing status to married filing jointly from the often less beneficial married filing separate status can make them eligible for more tax breaks and ultimately a larger tax refund.
3. Earned income credit: Low-income workers may be eligible for the Earned Income Credit, depending on marital status and family size. For example, a married couple with three children may qualify for the maximum credit of $5,891. Only 20 percent of those eligible claim this credit.
Boston.com: What new tax breaks might help Bostonian’s lower their tax burden?
Pirner: The recent legislation to avert the fiscal cliff included items that will reduce your 2012 tax return. Some key credits to remember when filing taxes this year are family-friendly tax credits, including $1,000 Child Tax, $2,500 American Opportunity Credit and the $4,000 Tuition and Fees deduction.
Boston.com: Is it ever worth moving in order to pay a lower tax burden?
This is a very personal decision and all factors should be considered when evaluating such a life changing event. The best advice would be seek out the advice of a qualified tax professional who can discuss your individual tax situation.