8 Most Frequently Overlooked Tax Breaks
These tax deductions and credits can help you save money rather than paying more than your fair share to the government.
Keeping up with ever-changing tax deductions can be a challenging. Worse yet, most people are continually overlooking deductions that could affect their refund. By maximizing their deductions, taxpayers can save more money – and less for the IRS.
This tax season, taxpayers across all income levels can reduce their tax burden by taking advantage of some commonly overlooked deductions and maintain proper records. Below is a list of some frequently overlooked deductions for reference.
Keeping a good record of all your medical-related expenses is a smart way to clear the tax deduction hurdle. Generally, medical expenses not reimbursed by insurance or paid through a tax-advantaged plan are deductible. You can only deduct on Schedule A (Form 1040) qualifying medical expenses more than 10 percent of your adjusted gross income.
Cost of with dealings with medical professionals, diagnoses, medical aids, cost of meals and lodging at a hospital or similar institution if the primary reason for being there is to receive medical care, the IRS says. Medical transportation expenses including mileage for trips to health facilities, doctor’s offices, laboratories can also be included.
State and Local Sales Taxes
This applies for those who live in states that do not impose an income tax. State personal property taxes, real estate taxes, and also state and local income taxes are deductible on Schedule A. The IRS warns that the taxes must be based on value alone and imposed on a yearly basis.
For state and local taxes, taxpayers are permitted to deduct either their sales taxes or their income taxes, but not both. The income tax deduction is usually the better deal for citizens of income-tax states. The IRS has provided residents of states with sales taxes to help figure out their deductions which vary by state and income level.
Most taxpayers know that when they move to a new job location, most of the relocation expenses can be written off on their taxes. Even better, you get these deductions, without having to itemize on Schedule A. Distance of 50 miles farther from your former residence are eligible for deductions if time requirements are met. Taxpayers must have work full-time for at least 39 weeks within 12 months before or after starting a new job.
While taxpayers are busy jotting down donations they make to their favorite charities during the tax year; often they forget that other donations and expenses incurred while participating in charitable work are eligible too. The value of the clothing and household items donated as well as mileage in connection with your volunteer efforts are also eligible.
Expenses associated with a job search in your current occupation including fees for résumé preparation and employment of outplacement agencies are deductible as long as they exceed 2 percent of your adjusted gross income. These are counted as itemized miscellaneous expenses on Schedule A.
The Internal Revenue Code offers many tax-saving options for individuals who want to further their education. Interest income earned on savings bonds may not be taxed when the proceeds are used to pay higher education expenses. Additionally, up to $4,000 of higher education tuition and fees paid is available for deduction from your taxable income without having to itemize.
Retirement Tax Savings
Most taxpayers already know that contributions made to the traditional IRAs are tax deductible. But some also qualify for the Retirement Savers’ Credit (created to give average- and low-income taxpayers an incentive to save). You get up to 50 percent of the first $2,000 you contribute to a retirement account, either an individual retirement account (traditional or Roth) or a workplace plan.
Members of the military reserve forces and National Guard can deduct unreimbursed travel expenses for reporting to military reserve or national guard duty at least 100 miles from home. Better still you get this deduction whether you itemize or not.
Taxpayers should keep all receipts and paperwork necessary to validate deductions.