As tax season approaches, are you looking for every tax deduction you can find? There are several tax deductions that are frequently missed during tax preparation. Tax credits and tax deductions can save you money when you file your taxes, but since many of them apply to things you do every day, it can be easy to miss them.
Almost 45 million Americans itemize when they file their taxes and they claim around $1.2 trillion dollars annually in tax deductions. Even though it takes additional time, itemizing on your tax return can save you big bucks on your taxes. There are several tax deductions which taxpayers frequently miss.
Income and Sales Tax
If your state has an income tax, you can deduct this from your federal taxes. Even if your state doesn’t have one, you can still deduct the sales tax you pay throughout the year. You’ll have to keep very good records, but it can really add up. If your state has an annual income tax, it is probably better to deduct this from your federal taxes than what you paid in sales tax.
If you purchased a boat, vehicle or a plane, you can deduct the state sales tax you paid. You should check the IRS tables to find the amount allowed. This is also true for any home building materials you buy.
Out-Of-Pocket Charitable Donations
While you may already consider the bigger charitable gifts you make, you can also deduct all the out-of-pocket expenses you have while performing volunteer work or in support for a charity. This includes the ingredients for the cake you made for the bake sale or the stamps you bought to mail out fundraiser announcements.
Medical expenses may be deducted if the total amount exceeds 7.5 percent of your adjusted annual income. If any of your expenses are reimbursed by your insurance company, they cannot be claimed.
Tuition And Fees Deduction
If you are taking a full course load toward a degree, you can claim the American Opportunity Tax Credit. Even if you took only one course to further your career, you might be able to take a deduction.
Student Loan Interest
Speaking of education costs, you can deduct the interest paid on student loans. Whether you’re a parent paying interest for your child’s loan or a student paying back your own loan, you can deduct the interest paid. Use the 1098-E to find the amount of interest paid.
Earned Income Tax Credit
This is a tax credit which can benefit low to moderate-income filers. It can be worth as much as $6,044. The amount depends on income and the number of dependents. Even if you make less than the minimum amount to file, you should file your taxes to see if you qualify for this credit.
Child And Dependent Care Tax Credit
This is a tax credit, which is actually better than a deduction because it comes right off taxes owed. Up to $6,000 can qualify if you pay child or dependent care expenses directly.
These are some of the tax deductions that are frequently missed. Take a close look at your taxes to ensure you are taking every deduction or credit you can.