Often, mistakes and errors made while filing tax returns are associated with missed deductions. The Internal Revenue Service (IRS) concedes that people generally overpay their taxes and it is important to get the write-offs you deserve. Here are 22 of the most-often overlooked tax deductions.
- State sales taxes: Everyone can avail of this write-off but it is especially useful to those who live in the states that do not impose state income taxes. You can pick between state sales taxes and state income taxes to write off. The IRS informs you how much you can deduct based on state and local sales tax rates.
- Charitable deductions: Out-of-pocket costs incurred while working or volunteering for a charity can be deducted from your taxes. Stamps bought for a school’s fundraiser or ingredients bought to help prepare food for a soup-kitchen is part of charitable donations.
- Costs incurred while looking for a job: These include travel and lodging and cab fare or employment agency fees and the cost of printing resumes and brochures. These costs can be considered as miscellaneous deductions if you itemize.
- Travel expenses for military reservists: To qualify for this, members of the military or National Guard have to travel more than 100 miles from home and be away from home overnight. They may then write off the cost of going to meetings and drills.
- Credit for childcare: You can qualify for a tax cut of 20-35% of what is paid for child care while working. Some employers offer a childcare reimbursement account that might be a better deal.
- State tax paid in the preceding spring: State tax owed for the previous year should be included in your federal tax return along with state income taxes withheld on your paycheck.
- Salary while on jury duty: If you were on jury duty and received your regular salary, you can turn that over to the company and in return write off the amount when filing your taxes.
- College credit: Even if you’re no longer in college you can use the Lifetime Learning Credit to help with the cost of higher education.
- Bonus depreciation: Business owners can write off the full cost of qualifying assets for the year these assets are put into service.
- No penalty for newly retired: Taxpayers who are 62 years and older can request a waiver of penalty using form 2210 if they owe more than $1000 when filing their return.
- Attorney’s bills while securing alimony: Part of the lawyer’s fee for setting the amount and tax advice can be deducted to the extent that the total exceeds 2% of adjusted gross income.
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Here are some of the other overlooked tax deductions:
People often forget to include dividends reinvested for the purchase of shares their tax basis, missing out on an important deduction. Student loan interest paid by parents are also tax deductible. Subscriptions to professional journals are another overlooked tax deduction. Sometimes, deduction of Medicare premiums for those who are self-employed are also overlooked. Another overlooked deduction is income tax deduction on the amount of estate tax paid for IRA assets of a decedent. Points paid to get a mortgage are tax deductible as well.
Also, American Opportunity Tax Credit (with annual credit of $2500) can be included in deductibles while filing tax returns. Other tax deductibles include baggage fees on airlines, social security taxes paid, premiums on bonds, and hospital service fees.
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