10 Overlooked Tax Deductions
Tax deductions and credits can save you money at tax time, but many taxpayers miss them because they don’t realize things they do in their everyday life can give them more money back. One thing you should know is that tax deductions and credits help your tax situation in two different ways: Tax deductions can save you money by lowering your taxable income. Tax credits directly reduce the taxes you owe, and if you qualify, you can claim a credit whether you itemize your deductions are not. See if you can get a break on your taxes with these 10 overlooked tax deductions.
1. Tuition and Fees Deduction
Taxpayers taking a full course load and working toward a degree can receive education benefits through the American Opportunity Tax Credit for college expenses, but those who took even just one class to further their career may be able to take the tuition and fees deduction. With this credit, you can deduct up to $4,000 for tuition and fees, books and educational supplies for you, your spouse or dependents.
2. State and Sales Tax Deduction
Taxpayers can deduct state income taxes, but what about people who live in states that don’t have a state income tax? The state and local sales tax deduction is useful for those who don’t pay state income tax because they can deduct sales tax paid on purchases. Even people who live in states that pay state income tax can benefit if they paid more sales tax due to large purchases.
From weekly doctor’s appointments to out-of-town visits with a specialist or for a procedure, the miles you log while driving your parents to meet their medical needs can be deducted. You can take that deduction if they qualify as your dependent. Keep a log as you’re running around. You can take 19 cents per mile driven for medical purposes in the 2017 tax year. If you’re staying overnight for a medical purpose, deduct $50 per night per person for lodging.
4. Job Searching
If you were looking for a job last year, you may be able to deduct costs related to your job search – even if you didn’t secure a new one. Job search expenses such as preparing and sending résumés, fees to placement agencies and even travel related to searching for a new job can be included.
5. Gambling Losses
Taxpayers who weren’t so lucky gambling last year should know that their losses can be deducted if they itemize their deductions. However, your amount of losses cannot surpass your winnings, which must be reported as taxable income. For example, if you have $2,000 in winnings and $4,000 in losses, your deduction is limited to $2,000. Make sure you have documentation such as receipts, tickets and other records to support your losses.
6. Charitable Contributions
Of course, you may know to estimate the value of items you or your parents donate to charity. But you also can include other out-of-pocket costs related to volunteering. If you or your parents bought ingredients to make meals for the homeless or elderly, or if you drove a personal vehicle while volunteering or assisting a charity, those and other costs can be deducted.
7. Home Improvements for Aging Adults
Investing in ramps for a wheelchair-bound parent, handrails and grab bars in the bathroom, or a stepless shower can be part of a deduction. It doesn’t matter if the improvements are in your home or your parents’ home, as long as it doesn’t add value to the house. The IRS says that the cost of the improvement is reduced by the increase in your property value. Other changes, such as widening doorways and hallways, lowering kitchen cabinets and installing lifts, also typically do not add value to houses.
8. Student-Loan Interest
You can deduct interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So, if the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by Mom and Dad each year. And he or she doesn’t have to itemize to use this money-saver. (Mom and Dad can’t claim the interest deduction even though they foot the bill because they are not liable for the debt.).
9.Military Reservists’ Travel Expenses
Members of the National Guard or military reserve may write off the cost of travel to drills or meetings. To qualify, you must travel more than 100 miles from home and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for driving your own car to get to and from drills. For 2017 travel, the rate is 53.5 cents a mile, plus what you paid for parking fees and tolls. You may claim this deduction even if you use the standard deduction rather than itemizing.
10.Child Care Credit
You can qualify for a tax credit worth between 20% and 35% of what you pay for child care while you work. But if your boss offers a child care reimbursement account—which allows you to pay for the child care with pretax dollars—that’s likely to be an even better deal. If you qualify for a 20% credit but are in the 25% tax bracket, for example, the reimbursement plan is the way to go. Not only does money run through a reimbursement account avoid federal income taxes, it also is protected from the 7.65% Social Security tax.
You can’t double dip. Expenses paid through a plan can’t also be used to generate the tax credit. But get this: Although only $5,000 in expenses can be paid through a tax-favored reimbursement account, up to $6,000 for the care of two or more children can qualify for the credit. So, if you run the maximum through a plan at work but spend even more for work-related child care, you can claim the credit on as much as $1,000 of additional expenses. That would cut your tax bill by at least $200.
If you have questions or comments regarding tax deductions, feel free to comment below or contact us direct so that we can assist you with cutting your tax bill by claiming all the tax write-offs you deserve.