The Most Overlooked Tax Deductions
by ELIZABETH CHECKLEYThe IRS offers you the opportunity to minimize your tax payments by offering both itemized and standardized deductions.
So What's the Difference?
- Itemized deductions. The government provides various incentives for various types of activities by allowing you to use your payments for certain activities as a way to reduce your income reported to the IRS. This can range from medical expenses to deductions for your home business. See the next section for some popular deductions you might have missed.
- Standard deductions. If you do not have a lot of expenses that don’t fall into the itemized deductions category or don’t feel like you have good records, don’t worry—the IRS allows you to automatically take a standard deduction. The amount largely depends on your filing status (i.e. retired, single, married, dependents, and other factors).
How to Find Those Big Tax Deductions
Here are the general categories to use as a guide to find some of those deductions that you or your tax preparer might have missed:
- Your Home. Your mortgage interest, property taxes, and even home improvements might be deductible.
- Your Family. Depending on your income level, you can get deductions for people who live with you and depend on your income. There are also deductions for adoptions expenses, child care, and more.
- Donations. If you make charities to donations, make sure to save those receipts. Those are deductions that are often forgotten (and misplaced).
- Cars. There are various credits available for your car – ranging from environmental (energy efficient) to your car registration fees.
- Education. From the interest you pay on student loans to courses you take towards a degree can be deducted.
- Medical & Dental Expenses. Certain expenses that you pay for out of pocket for medical issues can be deducted.
- Taxes Paid. If you’ve paid state taxes, local taxes, or already made estimated taxes, make sure to double check you haven’t overpaid your taxes.
- Retirement & Investments. The most popular deductions are for income put away in retirement accounts.
- Job Related Expenses. There are certain expenses that you can deduct if you’re employer does not provide for reimbursable expenses.
- Self-Employment & Small Business Expenses. There are varying amounts of deductions available if you’re self-employed or own a small business. But be careful and talk with a tax expert first – the IRS monitors these deductions closely and you will increase your probability of getting audited.
- Rental Property Expenses. If you own property that you rent out, there expenses specific to your property that you can deduct from your rental income. Miscellaneous Deductions. This can include your tax preparation fees, robbery or theft, legal fees, alimony, and others. Make sure to talk with a tax expert since there are hundreds!
Have more questions? Click here to Ask a Tax Deduction Question.
Common Problems
- Taking deductions that you do not qualify for.
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