var $previous_hover, $previous_scheme = null;

$('input:checkbox').change(function(){
    var $this = $(this);
    var $album = $('.album');
    var $caption = $('.thumb-caption');
    var $currentHov = $this.data('hover');
    var $currentSch = $this.data('scheme');

    // Only remove the class in the specific `box` that contains the radio
    $this.closest('.selection').find('li.active').removeClass('active');
    // $this.prop('checked', false);
    $this.closest('.option').addClass('active');


    if ($this.closest('.selection input:checkbox').is(':checked')) {
        $album.addClass($currentHov);
    } else if ($this.closest('#hover-nav.selection').not(':checked')){
        $album.removeClass($previous_hover);
    }
    if ($this.closest('.selection input:checkbox').is(':checked')){
        $caption.addClass($currentSch);
    } else if ($this.closest('.selection input:checkbox').not(':checked')){
        $caption.removeClass($previous_scheme);
    }

    $previous_hover = $currentHov;
    $previous_scheme = $currentSch;

    if ($album.hasClass('hover05')) {
        $caption.children().hide();
        $caption.append('<span class="magnify"></span>');
    } else {
        $('.magnify').remove();
        $caption.children().show();
    }
});

<div id="settings-panel">
<form id="settings-inner" name="settingsform">
<span id="settings-icon"></span>
    <ul id="color-picker" class="selection">
        <li id="scheme01" class="option active">
            <label>
                <div class="color1">
                    <input class="hide" type="checkbox" name="scheme" value="scheme01" data-scheme="default" />
                </div>
                <span>Scheme 1</span>
            </label>
        </li>
        <li id="scheme02" class="option">
            <label>
                <div class="color2">
                    <input class="hide" type="checkbox" name="scheme" value="scheme02" data-scheme="scheme02" />
                </div>
                <span>Scheme 2</span>
            </label>
        </li>
        <!-- <li id="scheme03"><span class="color3"></span><span>scheme 3</span></li>
        <li id="scheme04"><span class="color4"></span><span>scheme 4</span></li>
        <li id="scheme05"><span class="color5"></span><span>scheme 5</span></li>
        <li id="scheme06"><span class="color6"></span><span>scheme 6</span></li> -->
    </ul>
    <ul id="hover-nav" class="selection cf">
        <li class="option active">
            <label>
                <input class="hide" type="checkbox" name="hover" value="nohover" data-hover="nohover" />
                No Hover
            </label>
        </li>
        <li class="option">
            <label>
                <input class="hide" type="checkbox" name="hover" value="hover01" data-hover="hover01" />
                Hover Style 01
            </label>
        </li>
        <li class="option">
            <label>
                <input class="hide" type="checkbox" name="hover" value="hover02" data-hover="hover02" />
                Hover Style 02
            </label>
        </li>
        <li class="option">
            <label>
                <input class="hide" type="checkbox" name="hover" value="hover03" data-hover="hover03" />
                Hover Style 03
            </label>
        </li>
        <li class="option">
            <label>
                <input class="hide" type="checkbox" name="hover" value="hover04" data-hover="hover04" />
                Hover Style 04
            </label>
        </li>
        <li class="option">
            <label>
                <input class="hide" type="checkbox" name="hover" value="hover055" data-hover="hover05" />
                Hover Style 05
            </label>
        </li>
    </ul>
</form>