With tax time right around the corner, many people are starting to get all their filing information together, such as receipts, donation records, bank statements, and 1099 forms. And while it’s important to make sure you have all the relevant documents so you can file your taxes correctly, it’s just as important to be sure you don’t skip any deductions which you may be eligible for. So before you send that paperwork in to the IRS come April, make sure you aren’t missing any of these 13 most commonly overlooked tax deductions.
Tax Preparation Fees – Listed first because so many people miss out on it. If you pay anyone else to help you or to do your taxes for you, you can deduct any of these costs from your return. This is a very common deduction to miss, because you really don’t believe that you can deduct the cost of preparing your tax bill to the government!
Student Loan Debt Paid by Parents – It doesn’t matter if you yourself didn’t pay the interest on your student loan, as you can write off up to $2,500 of it on your taxes even if your parents paid the bill for you out of their own pocket. Your parents, however, cannot write it off on their taxes, since you are the one liable for your borrowed money.
Out-of-Pocket Charitable Donations – I am terrible at keeping my receipts from all the stuff I donate to Goodwill; but I am even worse of keeping track of any other cash donations I give throughout the year! $25 here, $30 there, it all adds up – and you can write it off your taxes even without a receipt if the amount is less than $250. If it adds up to more than $250, you will need proof from the charities that you gave them the money.
State Sales Taxes – If you live in a state which doesn’t collect income tax, this deduction is primarily for you. (We’re looking at you, Alaska, Florida, Nevada, South Dakota, Texas, Wyoming, and Washington) When filing your return, you have the choice as whether to deduct your local and state income tax or your local and state sales tax. Since an income tax would likely be higher for almost anyone filing a return, it would make more sense to claim that on your return.
Gambling Losses – Have an incredibly bad string of luck during your last trip to Atlantic City? Don’t fret – you can deduct those gambling losses against any money you did win during the year. If you didn’t win any money, you can’t deduct your losses.
Airline Baggage Fees – Self-employed? Traveling a lot for work? Be sure to keep track of any and all of those annoying baggage fees the airlines are imposing every time you want to bring an extra bag with you. Come tax time, they can be written off along with your other business expenses.
Educator Expenses – Educators can deduct $250 for any materials they purchased for their classroom. It does not require itemization, but wouldn’t it be nice if teachers got the supplies they needed for the classroom without having to open their own wallets?
Child-Care Credit – While not technically a “deduction”, the child-care credit actually reduces your total tax owed, dollar for dollar. This is an important one not to miss, as child care can be very expensive! The child-care tax credit is worth somewhere between 20% and 35% of the amount you shelled out for childcare while you are at work. Depending on how much you spent during the year, this could drastically lower your overall tax bill.
Alimony Payments – Child support is not deductible, but any alimony payments made during the year are. Hopefully that will ease some of the angst that can go along with having to write out those checks!
Points on Refinancing – We hear a lot about people refinancing their homes lately, and if you are one of them remember that any points you pay on your “new” mortgage can be deducted on a monthly basis over the loan term. This means you have to divide the amount paid in points by how many months are in your loan terms, and then deduct that amount times the 12 months of the year.
Mileage Deductions for Volunteers – If you volunteer for a charity, remember that you can take a deduction on your taxes for any mileage you incur while on the clock. The 2011 mileage rate is 14 cents per mile driven “in service of charitable organizations.” Also, don’t forget to keep track of any expenses involving meals and accommodations, which can also be deducted.
State Tax Paid Last Year – Owe taxes last April on your previous year’s state tax return? Remember to include that amount as a deduction on this year’s Federal return.
Job Search Expenses – If you found yourself unemployed this year and spent any money trying to find a job, here’s a little bit of positive news – you can deduct those expenses if they exceed 2% of your adjusted gross income (AGI) for the year. These deductions can include transportation, headhunter fees, and printing costs.
Each year, millions of taxpayers miss out on millions of dollars worth of deductions they could have taken but didn’t. Don’t let that be you this tax year! The tax code is ridiculously long and hard to understand, but with some careful planning, a little homework, and a careful review of your return before filing, you can hopefully take all the deductions you are eligible for this year.
We all need to pay our taxes, and there’s no legal way to avoid paying our fair share in order to pay for the services we use each and every day. But that doesn’t mean we need to pay more than we are required to. Don’t forget, your tax returns are due Tuesday, April 17 this year instead of the 15th, thanks to the weekend and then a Federal holiday.
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