10 Tax Deductions You Are Overlooking
Most individuals work to make the most out of every paycheck. Similarly, working to make the most out of your tax return may help you to save hundreds or thousands of dollars each year. Here are 10 valuable tax deductions that many taxpayers often overlook:
Tax Preparation Fees
If you purchased tax software like E-file.com last year or hired a professional to prepare your taxes, you can claim the expense on this years return. This is one of the most overlooked and forgotten deductions.
Retirement Plan Contributions
Many taxpayers are familiar with the benefits of using pre-tax dollars to fund their retirement plan. However, most filers don't realize that there is also a Saver's Tax Credit for first time voluntary contributions made to an Individual Retirement Account (IRA), a 401(k), or another retirement plan. As an individual, you can deduct up to $1,000, and if you're married filing jointly, you could deduct up to $2,000.
Financial Planning Expenses
If you've taken steps toward financial planning and/or managing your assets, you may have an unrealized tax deduction. If you pay a financial advisor to handle the details and the fees they charge represent more than 2% of your AGI, these expenses can be itemized on your tax return and taken as a deduction. Before filing your taxes, review your financial planning expenses to see if this may be an option for you.
Over the last decade the cost of obtaining a college degree has sky-rocketed. Fortunately, you can offset some of the costs by reducing your tax burden with several education tax credits. The American Opportunity Tax Credit will help if you're enrolled at least half time. The Hope and Lifetime Learning credit may also be able to provide assistance. However, one of the largest savings may actually come in the form of a deduction for tuition and fees rather than a credit.
Child Care Credits
Paying for child care can put a serious dent in your budget. The Child and Dependent Care Tax Credit offers a break in the form of a credit up to $6,000. Some people don't realize the full potential of this credit, and they only claim a portion of the full amount. You can claim this credit no matter your income level, though the total amount of the credit decreases as your income increases.
Losses from Theft or Destruction
It is unfortunate that anyone will have to suffer through a natural disaster or a home robbery. When this happens, insurance companies often don't reimburse for the full cost of the loss. If this is the situation you find yourself in you can deduct theft- or destruction-related expenses that your insurance company refused to cover on your tax return.
If you've been searching for employment over the last year, you may have an unrealized tax deduction. Job search related expenses can provide an often overlooked tax break. Whether you received an offer or took a job, you may be able to deduct expenses related to your search. These could include everything from placement agency fees to travel costs for interviews to the cost of preparing and sending out your resume. Note that this deduction only applies to those already in the workforce, not to first-time job seekers.
From unexpected injuries to chronic conditions, medical expenses can add up quickly. Taxpayers have to pass an adjusted gross income (AGI) threshold before claiming medical expenses, which can make it tough to get help with these costs. However, many taxpayers forget to factor related costs like travel expenses, insurance premiums, and even certain treatments into the equation. Keep track of everything you've spent on medical costs, and you may find that you can deduct these expenses.
You may already be aware that you can deduct cash contributions made to 501c3 charitable organizations. Out-of-pocket expenses related to charitable activities, however, are commonly missed tax deductions. If you bought supplies for a charity or donated gently used goods to a nonprofit organization, you can deduct these expenses. You can also deduct related mileage costs if you used your personal vehicle for charity work.
Energy Efficient Improvements
Eco-conscious homeowners may be eligible to claim certain energy efficient home improvements on their tax return. See our article on the top green tax breaks for specifics on where tax payers can save the most. Note, in most cases taxpayers can only deduct for these improvements once, and different types of improvements have different dollar limits.
When it comes to tax deductions, this list covers just a handful of the dozens taxpayers can potentially claim. If you're worried about finding all of the possible deductions you may be eligible for, there's no need to stress. File your taxes with us, and our easy-to-use platform will help to identify deductions for you so that you can maximize your tax refund.