Year’s ago, I used to do my own income taxes. It was simple enough, so I thought. I had my two dependents for my earned income tax credit, Back in those day’s that is all I was concerned about, that coveted earned income credit. I had a job that didn’t pay very much, so that earned income tax credit really helped to boost my refund. Fast forward a few years and a few more children/dependents, my tax situation changed.
I went to a tax professional and as a courtesy, this person reviewed some of my prior year’s returns. Imagine my surprise when she told me I could file an amendment and receive even more money. I had overlooked a few tax deductions, that ended up costing me a pretty penny. Some tax deductions and credits can get overlooked. Find out which tax deductions and credits you have coming to you so you’ll keep more money in your pocket.
Some tax deductions and credits can get overlooked, and I don’t want that to happen to you. Find out which tax deductions and credits you have coming to you so you’ll keep more money in your pocket. Making sure you receive every tax deduction and credit you have coming to you is one of the best ways to ensure you don’t leave any money on the table during tax time.
Overlooking deductions can cost you money, that goes without saying. What is to blame for missing these potentially valuable deductions? There are a variety of reasons, including last-minute filers and those who don’t read the ‘what’s new’ section of the instructions. I was one of those who didn’t read the what’s new section. Reading is so fundamental.
Some often-overlooked deductions will help you keep on top of your taxes so you can minimize your tax bill and, possibly, maximize your refund. Many of these deductions must exceed a certain percentage of your adjusted gross income to yield tax savings.
Working for yourself
If you work for yourself, there are various costs involved in running your own business from a home office. These costs can be legitimate and valuable deductions. Taxpayers who operate businesses from home may always deduct the portion of household expenses related to the space used exclusively as a home office. However, the deduction is often left off the tax form because the taxpayer is afraid it will lead to an audit.
This fear probably is unfounded. The IRS does not release statistics on its home office audits. Taxpayers who meet the requirements for a home office deduction should claim it. Just make sure you keep good records to support your claims. Costs such as high-speed Internet access and other expenses related to your computer are legitimate. So are car expenses and anything used exclusively for the business as long as they are attributable to your business and office space.
Working for someone else
Another category of deductions often forgotten is unreimbursed employee business expenses. If your employer allows you to telecommute from home, for example, you may deduct part of the household expenses related to a space used exclusively as a home office.
Employees must show that they work from home for their employers’ preference and not their own convenience.
One of these overlooked off-site working deductions is the cost of going from your home office to another work location. People also frequently forget to deduct expenses related to business. Anything required for work may be deductible, including the use of a personal vehicle for business, tools you have to buy to do a job, and work clothes. Any clothes you deduct must be only for work; if they’re suitable for non-work situations, you can’t claim them as a work expense. So don’t try to claim that cute little romper you bought for you weekend getaway. Even if you did wear it to work.
Don’t forget about job-hunting expenses. Costs for resume preparation, mailing resumes, and travel for job interviews are deductible as miscellaneous itemized deductions.
The most lucrative overlooked potential deduction is the Higher Education Expense Deduction. This deduction allows a married couple to write off up to $4,000 a year in qualifying higher education costs, mostly tuition.
The income limits for it are higher than for the education credits. Some people who do not qualify for the credits can still take the deduction.
Another forgotten education deduction is the popular 529 plan for college savings, which is deductible on many states’ tax returns but not on federal returns.
Taxpayers who itemize medical costs not covered by insurance need to check what the IRS has characterized as “qualified medical expenses” for that tax year.
Past qualified expenses include:
- hormone therapy
- sex reassignment surgery for someone afflicted with gender identity disorder
- batteries for hearing aids
- fertility treatments are also deductible.
These treatments are expensive and will help in meeting the 10 percent of adjusted gross income threshold.
Personal property taxes on vehicle registrations, often called ownership taxes and prior ownership taxes, are deductible, although they may be called by different names in different states.
Many taxpayers don’t know about the saver’s credit, also known as the retirement savings contributions credit. This helps offset part of workers’ contributions to their IRAs, 401(k) plans and similar workplace retirement programs.
They also might not know that they may deduct alimony payments, but not child support payments.
Taxpayers who do volunteer work for a charity may deduct unreimbursed expenses, including the cost of the use of their personal vehicles.
Don’t get discouraged. Just because you didn’t qualify for a deduction one year doesn’t mean you won’t qualify for it the next year. Many deductions are limited by your modified adjusted gross income, but the limits for some deductions may be adjusted annually based on inflation.
Tax time can bring loads of anxiety for many people. You never know how this information may benefit someone. Please feel free to share with your tribe, by clicking one of the share buttons below.