The tax code of the IRS is one of the most complex in the world, meaning that there may be deductions out there that you are not utilizing. In particular, there are several types of deductions that are missed by DIY filers.
There are tax credits or deductions that even apply to every-day things that you are not itemizing. These itemizations add up to $1.2 trillion dollars in deductions annually for the country, in which only 45 million filers take advantage of.
Charitable Donations & Volunteer Work
Charitable expenses used during volunteer work that comes out of your pocket may be contributed towards tax deductions. This includes supplies that you purchase, cost of fundraiser expenses, and other items that may be directly itemized.
Medical costs can definitely cause financial ruin for many Americans. Fortunately, if you use more than 7.5% of your income towards your medical treatments and prescriptions, you may claim it as a deduction. This only applies to expenses not covered by your insurance company, including 23 centers per mile in related travel costs.
Income and Sales Tax
If your state has an income tax, it may be deducted from your federal taxes. The sales taxes you pay locally also can be deducted from your annual tax return. The cost of vehicle purchases, construction materials, and other specified items are deductible up to a certain amount.
Be sure to itemize your state taxes and purchases in case there is a deduction to be applied, whether it is new or already existing. Take a look at the sales tax deduction calculator provided by the IRS to know exactly how much you can deduct.
Combating the high cost of education in the country, the American Opportunity Tax Credit may be applied to full-time studies. You will need to itemize your courses via the Form 1098-T Tuition Statement at the beginning of the tax year to apply the deduction. Even if you take just one course to further your education, there may be an applicable deduction.
Low Income Earners
The Earned Income Tax Credit is worth up to $6,044 for low to medium income workers. Having dependents also come into play when calculating your total deduction. People who earn very little income tend to not file taxes, which is a mistake since this deduction applies to even the very low earners.
Student Loan Interest
If you are fresh out of university with lots of debt, you may be able to save on your interest payments in the form of tax deductions. Itemize the interest paid using the 1098-E and you will be able to determine how much can be saved. Even parents paying for their children’s debt may use this form.