If you don’t hire a tax professional to assist you with your taxes each year, there’s a good chance that you’re seriously missing out on deductions you could be claiming.
Are you wondering what kinds of deductions there are that you might’ve forgotten to include when filing your taxes?
We’ve got the answer for you.
Here, we have all of the details on the top 7 most overlooked tax deductions, so you can make the most out of your tax return next season and don’t have to keep missing out.
1. State Sales Taxes
Did you know that not all 50 states impose income taxes on their residents?
If you live in a state without income taxes, you can choose to either deduct any state sales taxes you pay, or deduct state income taxes.
Obviously, if you don’t pay income taxes, deducting state sales taxes is the most cost-efficient option.
To make life easier, the IRS has tax tables that will show you how much you’re able to deduct in each state. Tables are based on both your income and state/local sales tax rates which will vary depending on where you live.
Have you recently purchased a boat, airplane, or vehicle? You can include those, too!
2. Any Charitable Contributions You Made Out-Of-Pocket
Chances are – if you’ve given to charity throughout the year – you’re probably already including each of your contributions in your deductions. Those types of gifts are kind of hard to forget about, aren’t they?
What you may not remember to include, though, are any costs you incur out-of-pocket while doing work for charity.
Let’s say you bake chocolate chip cookies for a charitable fundraiser.
These count as a charitable contribution! Don’t forget to hold on to any receipts you accumulate as a result of buying ingredients so that you can deduct each of these contributions.
If these types of contributions are a regular occurrence and you contribute more than $250 during the year, you’ll need the receiving charity to provide proof of your support.
3. Student Loan Interest That Mom or Dad Paid For
Once you accumulate enough student loan debt, it’s not uncommon to start looking for as many different ways to save as much as you possibly can.
One of the most common deductions available is for student loan interest that you’ve paid.
But what about the interest that mom or dad paid for? Well, you can deduct that, too!
To qualify for this deduction, your parents must no longer be able to claim you as a dependent on their taxes. If you’re no longer considered a dependent, you can deduct approximately $2,500 of student loan interest every year. Every year!
If you have student loan interest payments and mom or dad have helped you out, you don’t want to miss this awesome deduction.
4. Child Care Credit
The best thing about tax credits? They reduce your overall taxable income dollar for dollar.
If you pay for child care while you work, you can qualify for a tax credit anywhere from 20 to 35 percent.
Does your place of employment offer a child care reimbursement account?
If they do, you can benefit from this credit even more, as any money in the account avoids both federal and social security taxes.
There is one catch, however: you can’t use the money in the account to also generate this credit. But, you can pay up to $5,000 into this account, and then, if you still have child care expenses (for two or more children) coming in under $6,000, you can use the difference for the tax credit.
5. Legal Fees You Pay to Receive Alimony
While any court costs or legal fees you incur as the result of a divorce typically not considered a deductible but are rather considered as a personal expense, there is one section of the attorney’s bill you may be eligible to deduct: any legal fees you’ve paid to ensure that you receive alimony.
The reason being that alimony is considered taxable income – so you can deduct any legal fees which are attributable to tax advice and setting the amount of alimony.
To get these savings, though, you’ll have to itemize your deductions under miscellaneous expenses. Have your attorney provide you with a detailed statement of fees, and you can get a better idea of exactly what qualifies as a tax deduction.
6. Moving Expenses to Take a Job
If you’re in the military and are on active duty, you can deduct any moving expenses you’ve accumulated in order to take the position.
To qualify for this deduction, however, you’ll need to move at least 50 miles from your previous home. If you qualify for this deduction, you’ll get to deduct not only the cost of getting yourself to your new living area, but any household goods you may have, too.
7. Your Medicare Premiums
If you own a small business and are self-employed and qualify for Medicare, you can deduct the premiums you pay for both Medicare parts B and D, in addition to a Medicare Advantage plan or gap policy.
Whether or not you itemize, this deduction is still available to you.
The only scenarios in which you would be unable to claim this deduction is if you have another job which provides a subsidized health plan or your spouse has an employer that does and you’re on a family plan.
Don’t Miss out on the Most Overlooked Tax Deductions Any Longer
While these are 7 of the top most overlooked tax deductions, there are plenty others you may be neglecting to include on your tax return.
For a start, examine this list and see what you might have missed on previous tax returns.
If you have questions or are wondering what else you may be eligible to deduct, contact us!
We’ll be happy to direct you to any other helpful information we may have available.
Clinton F Wassor
